Fuel Marketer News Magazine Spring 2015

Spring Issue 2015

Your Source for News and Information

Terminal and Bulk Plant Automation

Fixing the Ethanol Market Are You Ready for EMV? Fuel Saves Lives!

SUPPLY, MARKETING, DISTRIBUTION, TRANSPORTATION & LOGISTICS

PUBLISHER’S NOTE

A note from Your Source for News and Information

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

Gary Bevers CEO & Group Publisher One year ago... …We introduced our Inaugural Issue of Fuel Marketer News print magazine.

Even though I still consider FMN Media to be a digital publishing company, our print magazine has truly become a labor of love. Today, I am proud to say that it plays a valuable role in our FMN product lineup and I appreciate the many genuine compliments I have received from my many industry friends and associates.

Of course, the magazine is the result of a great team effort! Our print magazine would not exist without the many talented and knowledgeable columnists and contributors who each bring a unique industry perspective to our pages. (They are listed in our masthead, just to the left of this column.) Deserving of special mention is Keith Reid, FMN’s editorial director, who brings his unique insights as the result of many years covering the fuels industry. He drives our editorial perspective and adds clarity to the news.

Today... …Welcome to the 2015 Spring/Summer Issue of 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.

In this issue, our energy-expert columnists deliver objective analysis of the facts, changes and trends in our industry and what it means to you as a fuel marketer.

Whether traditional fossil fuels (gasoline and diesel) or alternative fuels (ethanol, isobutanol, biodiesel, CNG, LPG, hydrogen, electric), we strive to thoroughly and objectively cover the information that matters to your business.

If you find our expert columnists, industry news and operational solutions’ feature articles interesting and helpful to your fuel business, you can find much more online every week. So, don’t wait for the next issue of the print magazine—you’ll miss out on too much quality content and timely coverage. Register for our e-newsletter at www.fuelmarketernews.com to get in the loop as new content gets posted.

Registration is free, and the process is short and easy.

In 2015 we will continue to work hard to make sure you have every reason to make us your go-to news site for motor fuels marketing, retailing and supply.

www.FuelMarketerNews.com

© Copyright 2015, Fuel Marketer News All rights reserved.

TABLE OF CONTENTS

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PUBLISHER’S NOTE

FUELS & SUPPLY

6

POLICY BRIEF: Keystone XL Vetoed— Quelle Surprise

10

Fixing the Ethanol Market

by Joe Petrowski

12

Diesel Becomes a Cash Cow at the Retail Pump

by Doug Haugh

15

Fuel Saves Lives!

Submitted by Fuel Relief Fund

20

Export Restrictions on Crude: Not a Ban, but a Bother

by Dr. Nancy Yamaguchi

30

Uncertainty Nothing New for US Biodiesel Industry

by Paul Nazzaro

Fixing the Ethanol Market

by Joe Petrowski

Diesel Becomes a Cash Cow at the Retail Pump

by Doug Haugh

RETAIL OPERATIONS

34

Are You Ready for EMV?

by Maura Keller

40

Vendor View: Seeing is Believing

by Brian Reynolds

46

Share of Wallet—Fact or Fiction?

by Shane Dyer

51

PayPal on the Forecourt

by Keith Reid

56

Beacons and Retail

by Vladimir Collak

Export Restrictions on Crude: Not a Ban, but a Bother Dr. Nancy Yamaguchi

Are You Ready for EMV?

WHOLESALE & FLEET OPERATIONS

60

Eliminating Fuel Cross-Contamination

by Chris Traczek

66

EPA Enforces New Diesel Power Generator Emissions Regulations

by Dr. Niels Tholen

by Maura Keller

TERMINALS & BULK PLANTS

72

Eliminating Fuel Cross-Contamination

Don’t Neglect Your Smaller Terminals and Bulk Plants

by Keith Reid

by Chris Traczek

BUSINESS OPERATIONS

78

Underground Storage Tanks— A Changing Marketplace

by Greg Cushard and Michael Manis

82

Make Money on your Bank Financing

by Corey Henriksen

Don’t Neglect Your Smaller Terminals and Bulk Plants

PRODUCT ROUNDUP

85

Additives Product Roundup

90

ADVERTISER’S INDEX

by Keith Reid

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FUELS & SUPPLY POLICY BRIEF

by Keith Reid

Keystone XL Vetoed —Quelle Surprise

S

urprising no one who has been paying attention to actions instead of words during the past six years, President Obama issued his first veto since 2010 and only his third since he has been in office when he killed legislation authorizing the Keystone XL pipeline that was brought to his desk on February 24. The bill passed with some degree of bipartisan support: 270 – 152 in the House and 62 – 36 in the Senate.

The numbers were lacking to override the veto.

Obama stated: “The Presidential power to veto legislation is one I take seriously. But I also take seriously my responsibility to the American people. And because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest—including our security, safety and environment—it has earned my veto.”

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The president was referencing the fact that the legislation was put on his desk before a State Department review of the pipeline had been completed. Opponents readily point out that the ongoing review by the current administration’s State Department has gone on for over six years, and appears to be functioning as a delaying tactic.

This, of course, is the same administration that routinely bypasses Congress on other environmental issues to accomplish through government agencies and regulation what cannot be achieved by passing cap and trade legislation. The same administration that bypassed Congress to implement an executive amnesty. The same administration that bypassed Congress to modify components of the already passed Affordable Care Act. The list goes on.

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“

Keystone XL Vetoed—Quelle Surprise

This is the same administration that routinely takes credit for America’s shale energy revolution during major public speeches while working aggressively to stunt that revolution at every turn through the Environmental Protection Agency and the Bureau of Land Management. With little doubt this is the most hostile administration to fossil fuels in our history, and one that is not even all that friendly to biofuels, of late.

Nixon’s price and allocation controls of the 1970s have to be considered, but ultimately they were more hostile to free markets and consumers than the fuels—not that the current administration comes up particularly short in those areas.

”

Given that the administration has done everything it can to delay and block the creation of good construction careers on the Keystone XL Pipeline, the veto can be described with two words: disgustingly predictable

worsen climate change and threaten our air, water and land. Instead, lawmakers should work to promote renewable wind and solar power, and reduce waste through energy efficiency measures that will save consumers money, improve the economy and combat dangerous climate change. And the president should move quickly to reject the proposed tar sands pipeline once and for all. It is simply not in the national interest.”

“Given that the administration has done everything it can to delay and block the creation of good construction careers on the Keystone XL Pipeline, the veto can be described with two words: disgustingly predictable,” noted Laborers’ International Union of North America General President Terry O’Sullivan.

American Petroleum Institute President and CEO Jack Gerard

This is the same administration that expresses openness to approving the Keystone XL pipeline during election season(s), but when it comes time to walk the walk after the election, the veto pen comes out. A recent PEW poll indicates that 61% of Americans favor building the pipeline while only 27% are opposed—but the administration couldn’t live with voters making an informed choice.

API President and CEO Jack Gerard criticized the president’s veto of the bipartisan Keystone XL legislation.

“We urge President Obama to look at his administration’s State Department review of KXL and see that the facts and the science back approval of this pipeline,” said Gerard. “We agree with his commentary on bipartisan cooperation and the need to move forward on critical infrastructure projects, and the importance of securing an American economy that supports the middle class. But instead of saying yes to 42,000 good paying jobs and enhanced North American energy security, this veto proved once again that it’s politics as usual here in Washington.

FMN has covered the underlying issues relevant to the Keystone XL pipeline as it moved through the recent legislative process, and the opinions of the various parties in a previous Policy Brief.

It should be no surprise to see those same opinions echoed today. Environmental activists are happy, while labor unions (a traditional Democratic Party ally getting thrown under the bus) and the oil industry are unhappy.

“This misguided Keystone XL bill, pushed by the fossil fuel industry, has met its just and expected doom,” said Rhea Suh, president of the Natural Resources Defense Council. “The president got it exactly right by vetoing it. Congress should stop wasting any more time pushing dirty energy projects that would

“Instead of standing with 72% of Americans, including a majority of Democrats who support the pipeline, this decision continues us down the path of indecision and delay. Voters spoke loud and clear last fall, saying they wanted Washington to work together. Unfortunately, the veto today demonstrates some are not listening.”

John Boehner and Mitch McConnell, the Republican leadership in the House and Senate, offered their response as to what’s next in an Op-Ed: “The allure of appeasing environmental extremists may be too powerful for the president to ignore. But the president is sadly mistaken if he thinks vetoing this bill will end this fight. Far from it. We are just getting started.”

Let’s hope they move beyond “just getting started” and find a way to actually finish something, for a change. n

READ MORE at fuelmarketernews.com

President Barack Obama speaks at the southern site of the Keystone XL pipeline on March 22, 2012, in Cushing, OK.

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FIXING THE ETHANOL MARKET

by Joe Petrowski

There are two opposing camps on Ethanol.

The first includes those who support ethanol vigorously, such as farm state politicians, ethanol producers and the supporters of bio-fuel development or anti-traditional carbon fuels. The opposition includes some coastal politicians, some consumers and some fuel merchants and those concerned with the cost of the renewable fuel mandate on our economy (estimated to be over $10 billion annually) as well as those who worry about the fuel vs. food tradeoff.

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There is a sensible solution...

Ending the ethanol mandate with a hard stop would harm the farm economy, devastate manufacturers that have poured over $100 billion of capital into the industry, create significant unemployment and impair a slew of hard assets and the bonds backing them.

And, while we are more self-sufficient in petroleum than at any time since 1949, removing 13 billion gallons of ethanol would add one million barrels/day to oil demand, which is certainly not in our national interest. While that is not a problem today, oil is inherently volatile and foreign oil suppliers are inherently unstable. We should cherish the redundancy and optionality alternate fuels supply.

Unless I am stuck on the side of the road or hungry, I have never been influenced by the food vs. fuel argument. Whether a bushel of corn should be consumed as cereal, meat or burned as ethanol depends on price, alternatives and circumstances. This is what markets are for.

Ethanol today is $1.65 per gallon and wholesale gasoline is $1.95, so blending in ethanol lowers the per-gallon price (not counting the tax break on ethanol and lower BTU content). But ethanol has been as high as $5 per gallon in last 10 years, and gasoline has ranged from $1 per gallon to $3 per gallon in the same time period. While most politicians’ time horizon is from the last election to the next one, responsible leaders and policy makers should plan for longer and more divergent outcomes.

The solution is to push for more flex-fuel vehicles and equipment (tanks, pumps and hoses) that can handle higher ethanol blends (up to at least 30%), and let the fuel merchants handle the blending and labeling. End the subsidies and mandates that are made more complex by declining consumption from

“

The solution is to push for more flex-fuel vehicles and equipment (tanks, pumps and hoses) that can

”

handle higher ethanol blends (up to at least 30%), and let the fuel merchants handle the blending and labeling. End the subsidies and mandates that are made more complex by declining

less expensive fuel merchants would generate a run on tiny milking stools (though I am sure PETA would object).

If the United States had the same percentage of flex fuel vehicles as Brazil, we would currently be consuming 25 billion gallons of ethanol (more than the current mandate), saving $1 billion in treasury expenses and using one million barrels less petroleum per day.

Farmers would smile, taxpayers would smile, consumers and fuel merchants would smile, producers would smile and squirrels could relax. n

consumption from CAFE standards and demographics.

CAFE standards and demographics.

We would also need to modify the oxygenate requirement from EPA, or allow marketers to meet the requirement by any alcohol, ether or additive (excluding MTBE), or, set a minimum ethanol content at 10% but leave the maximum open. That would again relieve the Treasury of a subsidy, and let market work.

If ethanol is cheaper, more will be blended in, and if its premium to gasoline widens or gasoline is at a significant discount, then less will be blended in. In fact, the elasticity and competitiveness of the fuel market at all stages along the chain is so sharp that as long as the fuel is legal, the cheapest blend will be produced. The consumer can make the BTU determination or we can post the BTU equivalent. Our fuel distribution and marketing system is sophisticated, innovative and competitive. If squirrels’ milk were a transportation fuel, effective, legal and

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

READ MORE at fuelmarketernews.com

Diesel Becomes a Cash Cow at the Retail Pump

by Doug Haugh

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FUELS & SUPPLY

D

iesel demand in the US is growing and is expected to rise from roughly 48 billion gallons in 2015 to over 67 billion gallons by 2040. This growth will offset what is expected to be a 25% decline in gasoline demand for the same period. So the question for fuel marketers is how to capture more of this growth while dealing with a rapidly changing gasoline market.

For many fuel retailers, the answer has been to add diesel pumps to their existing retail gas stations. For those fuel retailers now selling diesel, the margins have proven to be an unexpected bonanza. At one point in January, the average rack-to-retail margin was $0.90 a gallon. These breathtaking spreads have since come back to earth but are still ranging between $0.30 and $0.50 a gallon, depending on where you are in the US.

Wholesale vs. DOE Retail Diesel US Average

$4.50

Year to Date

51¢

$3.50 $3.50

2014-Q1

$3.00

26¢

$2.50

2015-Q1

$2.00

51¢

$1.50

DOE Retail

$1.00

What can fuel marketers do to capture more of this growing diesel demand while offering customers better value?

For those with the technical and marketing experience, continuing to invest in commercial cardlocks seems wise, at least where reasonable real estate can be obtained. Easier to deploy and environmentally safe bulk diesel tanks connected to convenient back yard dispensing solutions are a win-win for both the fleet customer and fuel marketer.

Lastly, giving mobile fueling/wet-hosing another look may make more sense than ever. At these retail prices, even if the fleet operator has low labor costs and is close to a retail station with diesel, there is still a strong value proposition to be made. n

Wholesale Rack

$0.50

Wholesale Rack to Retail Spread

$0.00 JAN ‘14

MAR ’14

APR ’14

JUN ‘14

AUG ’14

OCT ‘14

DEC ’14

FEB ‘15

MAR ’15

Source: Oil Price Information Service (OPIS) and Energy Information Administration (EIA) Wholesale prices include average federal, state and local taxes.

Douglas H. Haugh

I know those deeply involved in the diesel business will be quick to say, “that’s not how most fleets buy their diesel; they have deep discounts off of retail.” True. Most large fleets have cost plus, retail discount, or the lower of the two formulas that provides significant savings as compared with the cash retail price that DOE reports.

So while neighborhood auto-diesel sales are sporting margins twice that of gasoline, most of the volume is being sold a lot cheaper. Right? Well, one of the major truck stop chains offering these discount

price programs is public: TravelCenters of America (TA). Reading the transcript of TA’s fourth quarter earnings call we find “gross margin per gallon was nearly $0.28 or $0.11 per gallon over the same measure in the fourth quarter of 2013.”

So what can fleets do to save money on diesel? Seems that if you are a

customer that has to purchase your fuel at a retail fuel island, you simply must find a way to get access to the 10¢ – 30¢ savings that the big fleets are saving. If you are a fleet that can possibly squeeze in a bulk tank on at least some of your properties or truck terminals, the payback for doing so is painfully obvious.

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.

READ MORE at fuelmarketernews.com FMNMagazine

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FUELS & SUPPLY

Fuel Saves Lives!

Submitted by Fuel Relief Fund

Hurricane Sandy, 2012

Natural disasters strike without warning,

equipment, water purification plants cannot operate, food preparation is limited, lights do not turn on and cell phones and computers do not get charged, impeding emergency warnings and other advisory communications.

leaving behind the mass destruction of resources, devastation of businesses and homes and people struggling to survive one day at a time. Our hearts fill with compassion for those in need; we want to help. Our thoughts

In addition to enabling use of life saving equipment, facilitating essential communication and assisting in healthy food preparation, fuel, in the form of heating oil and/or coal, is a basic component to keeping shelters warm and safe.

Disasters frequently occur as a result of unexpectedly severe weather conditions leaving people stranded without access to the most elemental needs including temperature control. The Red Cross, the United Nations and many non-governmental organizations recognize the importance of fuel and have turned to Fuel Relief Fund for their fuel supply.

focus on providing what we think of as primary needs— food, water and shelter. While these are essential life sustaining elements, we need to think beyond that box and acknowledge that access to fuel is of equal importance as a response to natural disasters. Fuel can and does save lives.

Fuel is vital to the operation of emergency response vehicles and fundamental to ensuring that necessary supplies can be transported to the most affected areas.

When a disaster strikes, entire communities are often left without power for an extended period of time. Without fuel to power generators, it is not possible to run medical FMNMagazine

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FUELS & SUPPLY

Fuel Saves Lives!

Fuel is a vital commodity that saves many, many lives!

Van, Turkey earthquake, 2011

Super Typhoon Haiyan, Philippines, 2013

• In 2010, a massive earthquake in Haiti left an entire country without power. Fuel Relief Fund provided all the fuel needed to power generators for police stations, hospitals, clinics, tent cities and orphanages. The fuel donation continued for over two months.

• When a major earthquake and tsunami struck Japan in March of 2011, Fuel Relief Fund reacted immediately.

Temperatures in this part of Japan were below freezing and victims were left without power. Fuel Relief Fund donated heating oil, which kept families warm for days, offering the literal warmth of friendship and caring along with hope for the future—and most likely increasing the survival rate.

When Hurricane Katrina hit the Gulf States in 2005, the lack of fuel contributed to victims of the hurricane being unable to access food, water and shelter. In addition, many had to rely on

power from generators for weeks and sometimes months before regular power was restored. Board members of Pacific Tank Lines voted to send a “fuel relief” tanker truck filled with gasoline on a journey from California to Mississippi and then on to Louisiana. Survivors of the hurricane were provided with free gasoline to run their automobiles and generators, aiding them in their time of need.

• In the winter of 2011, Fuel Relief Fund responded to a major disaster in Van, Turkey. The team assisted victims of an earthquake by providing coal to help those affected by the tragedy keep warm and comfortable in temporary shelters, tents and homes.

• As a response to Hurricane Sandy in 2012, tens of thousands of gallons of free fuel were distributed to disaster survivors and to a variety of emergency response vehicles. Emergency fuel distribution operations continued for a period of nine days.

First-hand accounts from recipients, government agencies and NGOs detailing how this donation contributed to the quality of life immediately following a disaster, prompted the establishment of the nonprofit organization, Fuel Relief Fund. Since its inception in 2009, Fuel Relief Fund has responded to many disasters at home in the United States and throughout the world.

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• Fuel Relief Fund responded in 2013 to Super Typhoon Haiyan in the Philippines. FRF supported the victims of Haiyan directly by providing free fuel to individuals and relief organizations so that they could begin to provide and distribute medicine, food, water, shelter and other necessary services. This relief effort lasted for over a month.

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Fuel Saves Lives!

The Philippines, 2013

Fuel Relief Fund, a 501(c)3 charitable organization, has developed into a major international non-profit organization with current offices in the United States and Europe. Fuel Relief Fund is supported by more than 1,000 individuals and corporations whose generous financial contributions fund its work before, during and after disaster relief operations.

Fuel Relief Fund knows it is not “if” but “when” the next disaster will occur. Furthermore, we now know that when that disaster does become a reality, the essentials of life… food, water, shelter—and fuel—will be needed to save lives! n

Fuel Relief Fund has forged successful relationships with the United Nations Office for the Coordination of Humanitarian Affairs, the Red Cross, Lions Club International and Global Giving. Fuel Relief Fund board members and volunteers have extensive experience and contacts within the fuel industry. The charity’s expertise in fuel procurement, equipment and distribution systems allows Fuel Relief Fund to obtain and donate the type of fuel most needed in the wake of a disaster, whether it is gasoline, heating oil or coal, and to do so in the most timely manner possible.

Fuel Relief Fund organizes and conducts an annual fundraising golf tournament attended by major players in the fuel industry. This event has been sold out each year.

Donations and fundraising efforts make it possible to respond to the next disaster without delay.

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If you would like to make a tax-deductible contribution, learn more about the organization and/or view more photos of relief efforts please go to www.fuelrelieffund.org

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FUELS & SUPPLY

Export Restrictions on Crude:

Not a Ban, but a Bother

by Dr. Nancy Yamaguchi

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FUELS & SUPPLY

The Shale Revolution, US Supply, and Supply Security Like any revolution, the Shale Revolution is causing change. Some of the changes are logical and predictable, but others are somewhat surprising and are having more wide ranging impacts than predicted.

In the United States, the shale revolution is causing a dramatic reversal of the downward slide in crude production, like an airplane landing, then suddenly firing thrusters and taking off again. This applies to new fields like the most notable Eagle Ford, Bakken and Marcellus shale plays, as well as to what were thought to be declining and played fields such as many in the Texas Midland Odessa area and Permian Basin. How far and how high will production go? It will depend on long-term price. Because of restrictions on exports, the upsurge in production reduced domestic crude pricing more than expected, which created localized surpluses.

The uneven impacts on pricing segmented the US markets, and it gave a price advantage to refineries with greatest access to the inexpensive crudes. The price disparity is leveling out, and global prices are now suppressed as well.

There are laws that create barriers to free trade in US crude oil. Some call them an “export ban,� which technically is incorrect, as this article will explain in a section following. The main restrictions date back to the 1970s, a time of oil price shocks and concerns over supply security. Much has changed since then, and the debate has been reopened. Many will argue that the laws do nothing to improve security. Theoretically, distortions to free trade create market inefficiencies that prevent resources from flowing to their highestvalue use. In short, the United States can institute policies that shift things about, but if the market distortions become significant, people will find a way to work around them. Many economists believe that it is time to scrap the restrictions on domestic crude exports.

From the perspective of a fuel marketer, what do the restrictions do, and how have they impacted domestic vs. foreign supply?

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FUELS & SUPPLY

Export restrictions on crude: Not a ban, but a bother

Location, location, location: why the new crudes do not benefit all markets

Figure 2: US refinery utilization rates: Strength is in the center

% ReďŹ nery utilization

Figure 1 presents the trend in crude production in Texas, North Dakota, and the three states sharing the Niobrara play: Colorado, Kansas and Nebraska.1 In 2004, crude production in these states was 1320 thousand barrels per day (kbpd). Crude production was trending downward, like a plane coming in to land. The advances in hydraulic fracturing and horizontal drilling reversed this. Production rose to 4625 kbpd in 2014, an increase of two and half times within a decade. These producing areas are down the central corridor of the United States. The rise in Canadian output, just north of the border, added even more to US supply, since most Canadian exports flow down through the center of the United States as well.

orange and yellow, while PADDs 1 and 5 are depicted in light and dark blue. Utilization rates in the center of the country, with their access to cheaper crude feedstocks, have been generally above 90% over the past few years, while rates on the coasts have languished in the 80s and below.

Figure 1: US crude production: Scrub the landing and relaunch Source: EIA

Changing the modes of crude delivery to refineries kbpd

In part, the regional disparity in crude price was caused by the lack of pipeline connections from the center of the country to the West Coast and East Coast. Pipelines are the least expensive mode of transport, and the center of the United States has an extensive web of pipelines. But the cost of building pipelines to refineries along the coasts has always been steep. In the case of PADD 5, the Rocky Mountains form a natural barrier. PADD 5 also includes Alaska and Hawaii, which are non-contiguous states unreachable by pipeline in any case. East Coast refineries also are far distant from crude producing areas, and many of them are smaller and less sophisticated than their US Gulf Coast counterparts.

Source: EIA

Unequal access by refineries The rise in light tight oil production combined with an increase in Canadian production caused a buildup of crude supply in the central part of the United States. Refineries along the path of this supply enjoyed low prices, and their throughput rose. In the year 2011, refinery utilization on the US East Coast, PADD 1 (Petroleum Administration for Defense District), had fallen to a dismal 68%. Across the country in PADD 5, the US West Coast, refinery utilization was only 81.9%. In contrast, utilization in the Great Lakes/Midwest, PADD 2, was 91.1%. Refinery utilization in the US Gulf Coast, PADD 3, was 88.9%. And utilization in the Rocky Mountain States, PADD 4, was 87.5%.

With restrictions on exporting US crude, and with refineries in the center of the country running at high utilization, the new crudes needed a place to go. Buyers and sellers began to look to alternative transport modes to handle influx, as shown in Figure 3. Rail deliveries of crude to refineries rose from 17 kbpd in 2004 to in 209 kbpd in 2013. Barge deliveries rose from 135 kbpd in 2004 to 586 kbpd in 2013. Deliveries by truck, typically the most expensive mode (though also highly flexible) rose from 134 kbpd in 2004 to 398 kbpd in 2013. In all, deliveries of crude to refiners using these three modes grew at a rate averaging over 17% per year from 2004 to 2013.

Figure 2 shows how refinery utilization rates in the center of the country pulled away from the rates achieved on the coasts.

PADDs 2, 3 and 4 are depicted in the sunshine colors red,

This price disparity likely would have been moderated more quickly and thoroughly, however, if trade in domestic crude had been left entirely to the market—which it is not.

1 The data used for the charts in this article are based on data published by the US Energy Information Administration. Year 2014 averages are derived from monthly data.

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Export restrictions on crude: Not a ban, but a bother

US Crude Exports: Not really a ban, but a bother

Figure 3: Growth in barge, rail and truck deliveries to refineries

kbpd

It is common to see discussions about lifting the “US crude export ban.” There are any number of such discussions and debates, but a reader should be cautious about fully accepting accounts that use the expression “export ban” without qualifications or clarification. It is not a ban—the US has in fact been a crude exporter for the past hundred years or so, and the current pattern of exports will be discussed in a section following. Realistically, however, it is a set of restrictions that, for most would-be exporters, are enough of a disincentive that exports are unlikely. The key laws governing US crude exports are the Mineral Leasing Act of 1920, the Energy Policy and Conservation Act of 1975 (EPCA) and the Export Administration Act of 1979. The 1970s brought a new era in oil, with the rise of OAPEC and OPEC. The public had to contend with the first serious oil price shocks brought on by the Arab Oil Embargo and the Iranian Revolution. At the time, the public believed that restricting the export of US domestic crude would enhance supply security. It is now arguable whether the laws did anything to enhance supply security, but the US energy market has worked within the constraints of this policy ever since.

Source: EIA

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Export restrictions on crude: Not a ban, but a bother

The “Short Supply Controls”— petroleum, and horses exported by sea?

History of US crude exports and destinations Given the provisions of the Short Supply Controls, it is now easier to view Figure 4, which shows the history of US crude exports by destination. In the 1990s, crude was often exported to the US Virgin Islands from Alaska. Alaskan crude production waned, however, as did refinery activity in the Virgin Islands. In the later 1990s and early 2000s, Alaskan crude from Cook Inlet was often exported to Asia, where oil demand was surging. This activity also dwindled. The only major outlet remaining was Canada, with whom the United States has a free trade agreement, and with whom crude swaps are common. Exports to Canada remained very small, however, until the shale oil boom began in earnest in the mid 2000s. The main growth in recent years has been trade with Canada. US crude exports to Canada soared from 9 kbpd in 2002 to 324 kbpd in 2014.

The regulations are complex, so this article provides only an overview of key features drawn from the statutes. Crude exports are regulated under the provisions of the Export Administration Regulations (EAR), administered by the Bureau of Industry and Security (BIS) within the US Department of Commerce. The regulations are delineated in the “Short Supply Controls” section 754.2 The main focus of the BIS is national security, including homeland security, cyber security, economic security, and export controls to prevent the spread of weapons of mass destruction— in short, very high-level topics. The short supply controls cover an odd combination, including crude petroleum, petroleum products, unprocessed red cedar, and horses exported by sea.

Despite the strategic importance of petroleum, controlling its export may not seem to fit with the rest of the Bureau’s work in the current market. Today’s market has an increasing level of domestic production, a decline in demand, numerous logistical difficulties delivering light tight oils across the country, and an international regime of low prices without the OPEC unity needed to defend prices by cutting production. Thus, there are many who believe that the restrictions should be eliminated.

Figure 4: US crude exports by destination 1993-2014

The license requirements concerning crude oil describe several types of permissible exports, including: kbpd

Europe/Other Asia Other America Canada US Virgin Islands

• Exports from Alaska’s Cook Inlet (state waters), • Exports to Canada for consumption therein, • Exports in connection with refining or exchange of Strategic Petroleum Reserve (SPR) oil, • Exports of California heavy crude (less than 20 degrees API*), not to exceed an average volume of 25 kbpd, • Exports consistent with international agreements,

Source: EIA

• Exports found by the President of the United States to be consistent with other statutory controls,

In the opposite direction, however, Canadian crude exports to the US grew from 1616 kbpd in 2004 to 2882 kbpd in 2014.

Canada is the main source of foreign crude to the United States.

Canada and the US are close allies, and the majority of Canada’s production is in landlocked Alberta Province. The United States is the most logical export market, and Canada would have to be regarded as a very secure source of supply. In the year 2000, Canada accounted for 15% of US foreign crude imports. In 2014, Canada’s share had grown to 39%. The share of Persian Gulf crudes was 27% in 2000 and 25% in 2014. African crudes suffered the greatest drop in market share, falling from 15% in 2000 to a mere 4% in 2014. This is explained largely by the quality of the crudes—Africa is known for high quality, light sweet crudes, and the influx of new crudes from shale plays compete more closely with this type of crude than with heavy sours from the Persian Gulf and many Western Hemisphere

• Exports of foreign crude that have not been commingled with domestic crude, with some specific rules pertaining to SPR crudes, and • Other exports heard on a case-by-case basis that are consistent with the national interest and the purposes of the Energy Policy and Conservation Act. People have a variety of ideas about what actually serves the national interest. But it is fairly easy to imagine specific cases where crude exports would receive expedited licensing, such as hurricanes or other natural disasters that leave domestic crude cargoes with no place to go except overseas. But at such a time, requiring permitting or presidential action may cause unnecessary delay.

2 http://www.bis.doc.gov/index.php/regulations/export-administration-regulations-ear * American Petroleum Institute’s measure is inversely related to specific gravity, so a low API crude is heavy and a high API crude is light.

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FUELS & SUPPLY

“

Export restrictions on crude: Not a ban, but a bother

sources. Indeed, the United States is preparing to expand crude trade with Mexico where light tight oils can be exchanged for Mexican heavy sours, since the light, low sulfur crudes will help Mexican refineries reduce fuel sulfur levels, and the US refining system is at a point where light crudes are starting to bottleneck towers, and cracking units require more vacuum gasoil feedstock.

”

Is oil supply independence possible? Technologically and scientifically, yes, it would be possible for the US to be 100% self sufficient in oil supply.

Third, US crude exports have been a steady feature in the overall balance, but at a very low level. The Export Administration Act was passed in 1979, and it did not eliminate exports, but perhaps capped them at a level consistent with the export conditions summarized above. But in recent years, exports have grown visibly.

The changing balance: US crude production, imports, and exports Imagine a young driver, say twenty years old in 1974, experiencing the Arab Oil Embargo and having to wait in line to buy gasoline. Forty years have passed, and that driver is now sixty and has seen the world change enormously. Some changes have been for the good, others not so good, and some are complex enough that they are impossible to judge. Definitions and calculations of “supply security” and “energy independence” vary, but Figure 5 clarifies the longer-term trends by comparing crude production with crude imports and crude exports from 1970 through 2014. Several points stand out.

Thus, we can see that we import less foreign crude, and of that, a greater share comes from Canada—a close ally and a stable source of supply. We produce more oil, and our demand has been falling as well. Given this, we can conclude that we are indeed more secure in our oil supply today. But it is not at all clear that the restrictions on exporting US crude had anything to do with it.

Is oil supply independence possible? Technologically and scientifically, yes, it would be possible for the United States to be 100% self sufficient in oil supply. On one side, the US could increase supply. On the other side, the US could cut demand.

Technologically, each refinery could be converted into a combined refinery-petrochemical plant capable of matching demand exactly, and pipelines could be built to interconnect everyone, so that no trade was required with the outside world.

But at what cost?

kbpd

Figure 5: The long-term view: US crude production imports and exports since 1970

Oil is a global market, and essentially every consuming country engages in some sort of trade, even if it is just balancing trade, such as exporting 20 kbpd of gasoline to the south while importing 20 kbpd from the north.

“

Changing US Energy Policy?

Despite the restrictions on exporting crude from the US, exports have grown. In 2014, crude exports totaled 346 kbpd, up from 50 kbpd in 2000. But the true growth has been in US exports of other products, as shown in Figure 6. Exports of natural gas liquids and liquefied refinery gases grew from 78 kbpd in 2000 to 707 kbpd in 2014. And the United States has become the largest exporter of refined product in the world.

Refined product exports have increased from 863 kbpd in 2000 to 2766 kbpd in 2014.

Source: EIA

First, US imports of foreign crude had been soaring before the oil price shocks of the 1970s. They collapsed in the early 1980s in response to high prices and the severe recession in the United States. Oil prices then collapsed in 1986, and US imports began to climb again. Crude imports now have been falling since 2005.

Second, US crude production had been on a downward path in the 1970s, but the price spike did not cause a large resurgence of production. US production grew modestly until the price collapse in 1986, and from that point, it began to fall. Prices began to strengthen in the post-2000 years, and advances began to be made in hydro fracking. US production has grown since 2008. In fact, crude production recently surpassed crude imports, and this is the first time this has happened since 1993.

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We produce more oil, and our demand has been falling as well. Given this, we can conclude that we are indeed more secure in our oil supply today. But it is not at all clear that the restrictions on exporting US crude had anything to do with it.

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FUELS & SUPPLY

Export restrictions on crude: Not a ban, but a bother

Figure 6: US exports of crude, NGL/LRG and refined products

kbpd

Would rescinding these restrictions be good for the economy?

Most economists believe so, simply because eliminating barriers to free trade allows markets to work, and this encourages efficiency. Naturally, there are those who oppose changing the law. Perhaps they believe that energy security is enhanced by the law, or perhaps their segment of business would be hurt by the change. When laws like the Energy Policy and Conservation Act and the Export Administration Act have been around for decades, the market adjusts and grows around the policies.

Figure 7 can be used as an analogy for US energy policy. By now, the tree has grown around the motorcycle, and we all wonder, can the motorcycle be removed without harming the tree? n

Source: EIA

Figure 7 compares the growth in refined product exports with the trend in refined product imports, defined here as finished products, not feedstocks and blendstocks. Some in-and-out trades are essential for balancing supply and demand in various submarkets and in various seasons, but the increase in refinery throughput has displaced a substantial volume of foreign product as well. Exports of refined products have risen by 1903 kbpd since 2000, while imports of refined products have fallen by 928 kbpd. The astonishing growth in exports makes the case that the shale boom has necessitated exports, and if exports of crude are restricted, the crude will be converted into a form that can be exported. Trying to treat the United States as a closed system with regard to petroleum supply and demand simply is impractical. If crude oil builds up into a surplus in one area of the country, a way will be found to deal with that oversupply. Realistically, the restrictions on exporting crude petroleum simply add a level of complexity.

“

�

By now, the tree has grown around the motorcycle, and we all wonder, can the motorcycle be removed without harming the tree?

Figure 7: The US has become a major net exporter of refined products Dr. Nancy Yamaguchi

kbpd

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

Source: EIA

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H

US Policy Concerning Oil Exports

IN HISTORY:

By Dr. Nancy Yamaguchi

Mineral Leasing Act of 1920

The Mineral Leasing Act of 1920 is administered by the Bureau of Land Management (BLM) within the Department of the Interior. The act governs the leasing of public lands for mineral prospecting and production. It also established the first petroleum reserve by setting aside certain lands in California and Wyoming for the use of the US Navy.

Energy Policy and Conservation Act of 1975 (EPCA)

The EPCA was a Congressional response to the Arab Oil Embargo of 1973, which caused the first major oil price shock in the United States. EPCA’s goal was to encourage domestic energy production on the supply side and to encourage conservation and efficiency on the demand side. It also gave the Executive Branch powers to deal with energy supply disruptions. EPCA established three key elements of US energy policy: the Strategic Petroleum Reserve, the Energy Conservation Program for Consumer Products, and Corporate Average Fuel Economy (CAFE) standards.

Export Administration Act of 1979

The Export Administration Act of 1979 gave the President powers to restrict US exports for reasons of national security, foreign policy, or short supply. The Export Administration Regulations set forth the “Short Supply Controls” that restrict crude oil exports. The license requirements define a number of permissible types of exports, such as exports to Canada for consumption therein. Other exports must be found to be in the national interest.

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A review of safety and accident statistics provided by the US Department of Transportation for the extensive network of existing US pipelines—including many linked to Canada—clearly show that in addition to enjoying a substantial cost advantage, pipelines result in fewer spillage incidents and personal injuries than over the road trucking and rail. Americans are more likely to get struck by lightning than to be killed in a pipeline accident.

Diana Furchtgott-Roth, Senior Fellow, Manhattan Institute: “Pipelines Are Safest For Transportation of Oil and Gas” Bottom Line: Those who claim to be against the Keystone XL pipeline, or pipelines in general, for “practical” reasons outside of raw ideology have apparently failed to do some basic research.

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FUELS & SUPPLY

Uncertainty Nothing New for US Biodiesel Industry

It was only 23 years ago that a University of Missouri researcher powered a pickup truck on oil squeezed from soybeans and the National Soy Diesel Development Board, today known as the National Biodiesel Board, was formed with seven members from four Midwestern states. Two decades later, the NBB boasts more than 250 company members from nearly every state and represents an industry with the registered capacity to produce some three billion gallons of fuel.

And yet the NBB will be the first to admit that the US biodiesel industry is facing uncertain times. With the EPA now more than two years late in establishing volume mandates for biodiesel under the Renewable Fuel Standard—not to mention its recent decision to effectively streamline biodiesel imports from Argentina—and with no clear answers from Congress on when or how the biodiesel tax incentive will be reinstated, domestic production has declined and many are calling into question the industry’s future.

So what else is new? Navigating uncertainty has been the modus operandi of the NBB since its founding.

If it hasn’t been policy uncertainty, it’s been quality uncertainty. If not uncertainty over how to handle and blend it, uncertainty over how to market and monetize it. Educating lawmakers, industry leaders and consumers on the benefits and operability of biodiesel has been at the heart of the NBB’s work.

And apparently, it’s been working.

by Paul Nazzaro FMNMagazine

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FUELS & SUPPLY

The NBB has been the driving force behind dozens of industry milestones, including state and federal biodiesel mandates, the emergence of Bioheat® as an ASTM-approved heating oil and biodiesel’s distinction as the first and only EPA-designated Advanced Biofuel being produced on a commercial, nationwide scale.

Achieving those milestones hasn’t been easy. It has taken a tremendous amount of technological innovation, entrepreneurial risk and collaboration between partners from diverse sectors who have recognized the need for a clean, homegrown renewable fuel. It has required the effective leadership, messaging and advocacy of the NBB and its members.

And it has demanded substantial investment, infrastructure, and government support. Until the RFS fell off track, the still-maturing industry had benefited from all of those things, enabling the production of more than one billion gallons in each of the past three years.

Despite the prevailing policy uncertainties, the manifold benefits of biodiesel, which have been the true drivers of its growth, are as relevant today as ever. Made from an increasingly diverse mix of resources such as recycled cooking oil, agricultural oils, and animal fats, biodiesel is

“

Uncertainty Nothing New for US Biodiesel Industry

The NBB has been the driving force behind dozens of industry milestones, including state and federal biodiesel mandates, the emergence of Bioheat® as an ASTM-approved heating oil and biodiesel’s distinction as the first and only EPA-designated Advanced Biofuel being produced on a commercial, nationwide scale.

”

renewable, reduces greenhouse gases and harmful air pollutants, decreases our dependence on foreign oil, and supports roughly 60,000 jobs across the country.

That’s why, in February, a bipartisan group of 32 US senators called for the EPA to quickly approve strong biodiesel volumes under the RFS, and a survey of 1,200 US voters found that biodiesel policy has overwhelming public support.

The recent public survey serves as another reminder of how far the industry has come.

Had the survey been conducted just 20 years earlier, biodiesel would have been a foreign concept to every person asked. In the time since, the NBB has navigated the industry through constant adversity to advance the interests of its members and secure biodiesel’s place in the national energy landscape as the most soughtafter blend stock for diesel fuel and heating oil distributors alike. As the distributors who have long embraced

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biodiesel know, the challenges of today, as evidenced by those of yesterday, will only serve to make the industry, and ultimately their businesses, stronger tomorrow.

The good news is that delays in policy are the only factors holding the industry back. If the EPA delivers on its promise of proposing increased RFS volume requirements this spring, and if the tax incentive is extended (as it has been for the past several years), biodiesel is poised to continue on its upward trajectory towards comprising 10% of diesel fuel demand by 2022, as the NBB projects.

The industry has proven that it has the production capacity, infrastructure, and public backing in place to support the continued growth of this important national commodity.

The NBB, its members, and some 60,000 workers are just waiting for the word. n

Paul Nazzaro Paul is the founder of the Nazzaro Group that provides consulting services, renewable energy, market analysis, fleet management, fuel quality assessments, supply chain management development, sales and technical training. He is also the president of Advanced Fuel Solutions, Inc. that provides insight on fuel quality and management programs.

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RETAIL OPERATIONS

EMV?

ARE YOU

READY FOR

by Maura Keller

H

istorically, credit card fraud has been a huge problem facing retailers, consumers and card-issuing banks alike. For decades, consumers have had limited liability on fraudulent credit card purchases—by law—and the card-issuing bank has been required to absorb the cost of fraud. But that’s about to change. In October, the US will be embracing EMV (Europay-MasterCard-VISA) credit cards. As such, there will be a liability shift, resulting in retailers being responsible for fraudulent credit card transactions when the transaction is not performed using EMV. Retailers are readying themselves for this big change, while getting a better understanding of what steps they need to take to protect themselves and their bottom line.

Changes Ahead The changes in liability relative to EMV as it relates to fuel marketers in the store (as of 2015) and at the pump (as of 2017) are significant.

Visa, MasterCard, Discover and American Express have mandated that liability for fraudulent cards will shift to the issuer or merchant/acquirer on October 1, 2015, whichever one is not accepting EMV transactions and using strong customer verification methods.

According to Michael English, executive director, product development, at Heartland Payment Systems, this liability is for fraudulent transactions committed with a counterfeit EMV card at the point of sale.

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The majority of the liability resulting from credit card fraud is currently the responsibility of the card issuer.

Following the EMV deadlines, if the card issuer has issued an EMV card and the retailer has not upgraded the site technologies to support EMV transactions, the liability will become the responsibility of the retailer.

When referring to EMV liability, the general rule of thumb is that liability falls to the party, issuer or merchant that is either not using EMV or is using the weakest cardholder verification method (CVM). “Chip & PIN” is the most secure of all CVMs, followed by “chip & signature.”

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RETAIL OPERATIONS

Additionally, MasterCard, Discover and American Express have announced a shift as it relates to lost and stolen chip cards.

“For the petroleum industry, different major oil brands and their acquirers may handle the liability shift differently,” said Tom Cerovski, vice president, products and technology services for Wayne Fueling Systems. “Some may pass it along to their retailers while others may shield the retailers from the liability.”

The EMV liability shift is focused on directing liability for fraudulent transactions, attributable to the use of counterfeit cards, to the party that prevented the EMV transaction from taking place.

As Cerovski explained, an EMV “chip on chip” transaction requires that both the card and the terminal support the chip technology. So if a chip-enabled card is used in a terminal not supporting EMV that results in a counterfeit fraudulent transaction, then the liability may go to the retailer if they have not implemented approved chip-enabled terminals at the point of purchase.

“Conversely, if a non-chip card— magstripe only—is used in a chip-enabled terminal, the liability for any resulting counterfeit card transactions goes to the card issuer,” Cerovski said.

English added that liability falls to the party that supports the less secure form of cardholder verification. “PIN is the highest form of cardholder verification,” English said. “Recently, Visa has announced a shift of lost/stolen liability to the issuer for chip card transactions completed at unattended chip-capable terminals that support no cardholder verification. This is to encourage merchants that deploy unattended chip terminals to support no verification for Visa in addition to PIN for the other brands.”

After each liability shift date, whatever party is responsible for an EMV transaction not taking place will be responsible for the counterfeit card fraud.

If the mandated dates hold, retailers could now be liable for counterfeit card fraud for all credit cards.

“

Visa, MasterCard, Discover and American Express have mandated that liability for fraudulent cards will shift to the issuer or merchant/acquirer on October 1, 2015, whichever one is not accepting EMV transactions and using strong customer verification methods.

”

So what is the relationship between the implementation of EMV and the payment card industry (PCI) standards recently met by the industry? James Hervey, director of product management for petro for Verifone, noted that EMV and PCI are separate standards that are not related to each other.

“EMV is a global standard for the implementation for chip cards, whereas PCI standards are focused on overall security of the cardholder data environment and overall security of applications that process cardholder data,” Hervey said. “They work with each other to secure electronic payments, but they are not related.”

Cerovski said PCI has been largely focused on personal identification number (PIN) security and now card data security, whereas EMV is focused on migrating to chip-based technology and reducing counterfeit card fraud.

“EMV compliance complements the PCI security measures by increasing the security on the payment cards themselves—moving away from the vulnerable magstripe to more secure ‘chips’ that include cryptography to protect the card data and authentication to defend against counterfeit card fraud,” Cerovski said.

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Top of Mind Concerns As the October deadline looms, the costs of the required EMV implementation is top of mind for businesses. However, the cost to retailers will vary significantly based on the equipment that they are currently using.

“One thing is for sure: with increasing cyber-crime, the costs associated with non-compliance can soar into the millions of dollars,” said Paul Kleinschnitz, senior vice president of cybersecurity at First Data, a global leader in payments technology. “And, not only will there be a monetary loss, but retailers will face significant risk regarding customer loyalty and reputational damage.”

According to Parker Burke, director of payment and media at Gilbarco VeederRoot, while the upgrade costs depend on the hardware currently at the site, Gilbarco helps to manage the investment through options that increase site profitability—as well as competitive financing programs through its partner Patriot Capital.

“Many of Gilbarco’s customers are looking at the EMV migration as an opportunity to not only enable better security for their customers, but also to implement technologies that will improve their consumers’ fueling experience and drive more traffic to their sites, such as Applause TV™ with VNET (VeriFone Digital Network),” Burke said. “This platform provides engaging entertainment and advertising content focused on the c-store consumer and can also provide a subsidized path to supporting EMV regulations.”

From an outdoor perspective, retailer costs can vary widely depending on the age and model of their dispensers and other site equipment.

“Newer dispensers often benefit from reduced EMV upgrade costs given most of the required hardware is already

RETAIL OPERATIONS

Are You Ready For EMV?

Forecourt EMV Building Blocks

In-store EMV Building Blocks

CRIND Upgrade

Chip Card Reader

CRIND EMV Software Update

Site Connectivity

present in the dispenser and the upgrade can be as simple as installing chip card readers and EMV software,” Cerovski said.

In other cases, more of the existing payment terminal may need to be replaced, which increases the cost, and some dispensers are so old they cannot affordably be upgraded and a replacement is in order.

Hardware and Software Requirements To accept EMV, a retailer needs to install EMV validated devices—at the counter or integrated within the pump. The point of sale (POS) system and pump provider must integrate the EMV approved device with their respective solutions and certify their POS system to the retailer’s acquirer for EMV acceptance, paying specific attention to the customer verification methods they will need to eliminate liability for accepting lost, stolen and counterfeit cards.

“The retailer cannot accept EMV cards without installing EMV approved devices and ensuring that their systems are upgraded to a version that is certified to their processor for EMV,” English said.

At a minimum, retailers will need to upgrade card readers both in store and outside at the fuel dispenser if they do not have EMV-capable card readers.

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POS Hardware

EMV-capable PIN Pad

POS EMV Software Upgrade

Site Connectivity

”

As the October deadline looms, the costs of the required EMV implementation is top of mind for businesses.

However, the cost to retailers will vary significantly based on the equipment that they are currently using.

“The best way to determine their current capabilities is to check the currently installed card readers with the manufacturer,” Kleinschnitz said. “The overwhelming majority of US gas pumps do not have EMV-enabled card readers and will require upgrades.”

Additionally, different POS equipment manufacturers have different requirements to ensure their POS software is ready for EMV. From a hardware standpoint, every convenience store retailer will need to check to see whether or not they have EMV capable card readers, both inside the store and at the outdoor fuel dispenser. If they do not have EMV-capable card readers, their indoor and dispenser terminals will need to be updated.

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Hervey said that in terms of software, there will be new software for payment terminals and there will be new network interfaces that will likely require new POS software upgrades, which is dependent on the merchant’s POS provider.

“Merchants should check with their POS provider regarding any necessary hardware or software upgrades,” Hervey said.

Stability of the Future Because EMV implementation has been a long process for businesses in the US, retailers are interested in the stability of this technology and where new upgraded software and hardware will be required in a few years.

Cerovski said the EMV hardware should be stable for some time; however, the software will likely require updates every couple of years.

“It is always a challenge to predict the future when it comes to new technology introduction and adoption in the retail petroleum industry,” Cerovski said. “That said, there are indicators that EMV technology will be with us for many years to come, whether it is in physical card form, or contactless or via mobile devices.”

Cerovski said the industry needs more secure transactions to keep consumer

RETAIL OPERATIONS

Are You Ready For EMV?

confidence in the payment system and EMV is one step in that direction.

Point-to-point card data encryption and card tokenization are other measures emerging to also help with data protection throughout the ecosystem.

“To keep pace with increasingly sophisticated attack methods, the security standards will continue to evolve,” Cerovski said. “This will require continued updates to at least the software to stay current with payment network approvals.”

When upgrading to EMV, English advises that the retailer also consider EMV contactless and near field communication (NFC) in their implementation plans.

will need to support the card brand contactless schemes such as PayPass, Paywave and Expresspay in order to accept mobile payments. The other technology petro providers should pay attention to is geo-location, either using global positioning system (GPS) or Bluetooth low energy. Each technology can help with customer movement and marketing.”

“The good news is that the vast majority of payment devices that manufacturers are offering support EMV contact, EMV contactless and NFC,” English said.

NFC opens the door to mobile payment acceptance, including Apple Pay and others. Petro POS and pump providers

Kleinschnitz said it is important that retailers in all markets take a holistic approach to data protection and security.

“EMV alone will not prevent cyber-crime from occurring,” Kleinschnitz said. “But it is an important tool to help protect merchants and their customers.” n

Key Solution Approaches Petroleum marketers and retailers need to work closely with their POS provider, pump provider and acquirer on when their systems will support EMV and what the upgrade cost will be. “Marketers and retailers need to evaluate their potential for fraud once the liability shift kicks in October 1,” English said. “Many businesses are approaching the implementation of EMV based on the chance of fraud and the percentage of international cards a site or store is currently seeing. Once EMV is implemented, staff training is key and awareness of consumer reaction to EMV chip cards is very important.”

When implementing the upcoming EMV, petroleum marketers need to— • Take the time to fully understand their liability and do a risk assessment.

• Ask their brand and acquirers questions such as: how many EMV cards are in circulation and how many will be when the liability shift goes into effect and how much liability risk are my sites exposed to for each fraudulent counterfeit card transaction?

• Perform indoor EMV technology changes at the same time they perform outdoor technology changes to minimize disruption, defer costs, and reduce site down time, especially as the true EMV liability risk is understood.

• Potentially build on PCI investments for EMV migration. Pre-deploy EMV dispenser hardware now and enable when site systems are ready.

• Consider implementing contactless readers to support contactless EMV as well as position for NFC-based mobile payment methods. Also, consider implementing sponsored media programs to help with EMV upgrade costs and increase return on investment for EMV migration.

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RETAIL OPERATIONS

Vendor View:

Seeing is Believing

by Brian Reynolds

Retail general merchandise inventory receiving has become an exact science.

Handheld barcode scanners have made receiving inventory in the back of the store a much easier and reliable way of determining the accuracy of a delivery.

Individual units can be handled, accounted for and quickly stocked for sale.

Counting inventory is easier than ever and point of sale (POS) systems can automatically provide reorders. The number one top line inventory expense is—for all practical purposes—invisible and nobody touches it, and it doesn’t scan. This is, of course, fuel.

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RETAIL OPERATIONS

Think about it for a moment. The fuel delivery, storage and dispensing process for all practical purposes really is invisible.

Fuel comes in a truck, and you can’t see inside the tanker. It’s transferred from the truck using a black hose that you can’t see through. The fuel is stored in a tank buried underground that you can’t see. It’s pumped into a customer’s fuel tank that can’t be seen, and the customer can only verify the amount with a meter on the fuel dispenser and on an automotive gas gauge that reports percentage of full in non-numerical fractions, with a needle pointing at lines that don’t represent any known quantities. The best part of all is petroleum marketers are billed based on amounts that use the same process only in reverse. Pretty cool, huh?

Some may say, “Well, we do have Automatic Tank Gauges.” To compound this particular type of inventory product delivery, let’s say a fuel transport truck shows up at noon on Saturday and 16 hoses are going full blast. What good does it do to perform a “before and after”

“

Vendor View: Seeing is Believing

”

Back in the day, operators could climb on top of a fuel tanker and do a “before and after” manual visible inspection.

However, for over 30 years that practice has been abolished for procedural and government regulatory reasons.

sticking with the ATG? Wouldn’t that information be worthless for verifying a delivery against the bill of lading (BOL)?

You might be able to argue that using metered sales numbers from the POS one could figure out the delivery. For argument’s sake, I’ll acquiesce and go

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with that thought. Then I would rebut by asking how long it took the drop to commence after the ATG “before” numbers were taken. I would also ask how many dispensers had already started pumping moments prior to the drop. If 16 hoses are pumping 8 gallons a minute or so, 100+ gallons could have already been dispensed that the “before” sticking doesn’t take into consideration. The same thing would occur when the drop ends.

Easily there could be a 400-gallon margin of error that can’t be accounted for using conventional ATGs. What happens if the meters are off on each dispenser? The two cubic inches per hose, while still legal, can further exacerbate the margin of error.

Back in the day, operators could climb on top of a fuel tanker and do a “before and after” manual visible inspection. However, for over 30 years that practice has been abolished for procedural and government regulatory reasons. I recently saw an OSHA warning sign that said, “Always wear proper hearing protection when reaching for objects on high shelves.” I’m sure the

RETAIL OPERATIONS

Vendor View: Seeing is Believing

A typical CFM installation has the ability to identify almost every category for fuel shrink, such as: • Short delivery,

OSHA safety inspectors that might come walking in at any time, particularly in West Texas where the wind blows 30 mph on a nice day, would frown upon climbing up a petroleum transport trailer! At least the hearing protection might keep you from getting dirt in your ears.

The fuel is invisible, so what? It’s also expensive and margins are unpredictable.

Margins—that’s where I am going with this story. Margins are tight and so are profits.

Yet our industry routinely spends billions of dollars each year on fuel inventory with a very loose process of accounting for it.

Even the EPA has accepted that “loose” is an acceptable accounting process by allowing for a margin of error of +/- 1% of the throughput plus 130 gallons per month.

Technology today has the ability to account for a fuel delivery with every dispenser pumping at maximum capacity and to do so accurately. This same type of technology will also determine flow rates and the accuracy of each meter in real time speeds. This process is known as Continuous Fuel Monitoring.

CFM technology will absolutely use older existing ATGs and produce extremely accurate tank volumes. CFM systems also capture totalizer numbers from the POS or pump controller and provide flow rates and detect for meter drift.

Profits are tight in this current economy.

Year-to-year sales numbers for many retailers have not grown. In fact, many

“

Profits are tight in this current economy. Year-to-year sales numbers for many retailers have not grown. In fact, many retailers are seeing declining sales. Many CEOs have started to look within and are taking “search and destroy” mentalities in the fight against shrink.

”

retailers are seeing declining sales. Many CEOs have started to look within and are taking “search and destroy” mentalities in the fight against shrink. If sales are flat lining, aggressively reducing shrink is a logical shift in strategy to increase profits.

With fuel being the undisputed top line inventory expense for most petroleum marketers, significantly reducing fuel shrink would seem to make sense.

Installing a CFM system has the ability to produce an extremely quick return on investment. An ROI of less than 12 months is something that many retailers experience due to the fact that most CFM systems are software-based and do not require replacement of existing hardware such as the ATG. FMNMagazine

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• Meter drifts, • Fuel theft from the UST or directly from the dispenser, and • Fuel system leaks.

Seeing is believing, and with the statistical charting provided with a good CFM system, a graphical representation of fuel inventory will provide a clear view of deliveries, inventory, individual hose sales, meter drift, leaks, cross drops and losses due to theft or a short delivery.

Future fuel losses can be greatly minimized depending on the operator’s desire to eradicate fuel shrink. n

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

What Does That Mean

?

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

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According to one data source, fuel tanker drivers earn an average of $18.38 per hour or typically $40,000 to $50,000 per year. This can vary substantially from market to market, and years of experience further impacts pay for this group. With location having the largest influence, other influences can be type of vehicle, i.e., transport, tank wagon, etc., and urban vs. rural markets. The majority of drivers report being highly satisfied with their jobs. A fair number enjoy medical while a majority get dental coverage. Vision coverage is also available to more than two-fifths.

Source: PayScale salary survey

Bottom Line: With the good earning, being at home with the family at night, and apparent satisfaction among those already in the field—where is the current and predicted future driver shortage coming from?

Perhaps it’s more of an educational and expectations challenge with the millennial generation.

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by Shane Dyer

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Share of Wallet

Fact or Fiction?

Since the early 1980s, those marketing Pacific Pride and CFN nationwide have carefully developed a lucrative enterprise around the unattended commercial fueling and reciprocal cardlock networking business model. Customers have likewise valued the opportunity to fuel in highly controlled, highly efficient environments that lower the total amount it’s costing them to fuel their vehicles. These marketers have successfully developed a unique competitive niche by being able to provide a level of service not available in the more common retail fueling environment.

Our analysis clearly suggests there is great risk in the share of wallet theory, particularly if you don’t properly manage the exposure of retail to your customers. Of the CFN marketers we’ve analyzed who have embraced the retail concept, they have all experienced what we are calling “retail bleed.” This is where your customers’ employees learn the card works across the street at the Chevron and opt to fuel there instead of at your site. When this occurs, the revenue shifts from you to both the retailer and your network provider.

In recent years, those marketing CFN have been presented with an argument that they are missing “share of wallet.” The premise behind this theory is that if you blindly extend to your customers the ability to fuel in retail locations, you will enjoy increased volume by picking up the fueling that is occurring outside of where your card works. Pacific Pride franchisees are now being presented with the same theory as they are being assimilated into the Fleetcor business model.

Over the last several months, we at PowerUp Fleet have carefully studied dozens of these marketers’ customer buying habits using a transaction analytics engine and financial revenue analysis tool. Our conclusion is that the share of wallet is more fiction than fact.

We have found that a large percentage of fleets are perfectly content fueling only in the cardlock locations because of the value provided. In most cases, a large number only fuel at the marketer’s own locations and don’t even use the other unattended reciprocal sites. A majority absolutely do not want their drivers fueling in locations where there are no gallon limits, product grade restrictions and where Twinkies may end up on their fuel bill. It defeats the purpose of the fuel purchasing policy they’ve implemented which is being enforced through the technology at the highly controlled, unattended cardlock locations.

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The impact of this is particularly devastating when we are enjoying higher rack to retail spreads. For example,* assume your cardlock pool margin is $0.25 (CPG/cents per gallon). After your network’s transaction fees, you will be making $0.243 per gallon on that domestic sale. If that customer bleeds into retail, you will be making (after your network’s transaction fees) a mere $0.022 per gallon—a difference of $0.221 per gallon.

Where does your revenue go? Based on a transaction in the Chevron network (assuming the station owner is making the same rack to retail margin), the retailer picks up $0.189 CPG. Your network picks up an estimated $0.038 per gallon (inclusive of their fees and based on an estimated realized interchange rate of 2.4%), and the rest is lost to interchange with the major.

But wait a minute! The share of wallet theory claims you will enjoy more profitability because you will pick up all of that customer’s additional volume that you are missing. Let’s do the simple math.

In order to make up for one gallon of retail bleed, that same customer will need to buy eleven more gallons outside of your locations to compensate for the loss of revenue on that one gallon. Each marketer needs to take a realistic look at whether there is that ratio of additional spend available.

Based on our analysis, the share of wallet theory is resulting in a net loss for many marketers. We are seeing bleed that is not being recouped by the necessary additional gallons. This is not to say that we are negative retail. In fact, we see it as a strategic component, but only if introduced to your clients in a controlled manner. What we define as controlled is to ensure that your customers are initially introduced to your most profitable fueling environments, and then, after review, exposed to the lower margin retail locations on as needed basis.

Additionally, they should gain access only after they sign a revised card use

“

Share of Wallet—Fact or Fiction?

The share of wallet theory claims you will enjoy more profitability because you will pick up all of that customer’s additional volume that you are missing. Let’s do the simple math. In order to make up for one gallon of retail bleed, that same customer will need to buy eleven more gallons outside of your locations to compensate for the loss of revenue on that one gallon.

”

agreement that ensures they understand the lack of controls in the retail fueling environment. Failure to do so has led to financial losses for some marketers in the courts.

Today, many marketers are not managing this process, and the networks are adding their own layer of difficulty. In the case of CFN, each time a card is issued through the system, the marketer needs to physically select all 50 states on each individual card in order to lock out retail.

For Pacific Pride franchisees, who are all facing a complete card conversion, this is a more substantial issue, as the current indication is that cards are to be issued without any retail restrictions. After the cards have been shipped to the customers, the franchisees will need to physically enter up to five zip codes on each card to lockout as much of the retail environment as possible. Under this structure, it’s not possible to completely lockout all retail locations.

The simple fact is that the franchisees don’t have the bandwidth to go back and modify thousands of cards manually and the network knows this. In our opinion, they are banking on the franchisees failing to lock the cards out as they make

more money when the cards are used in retail. Equally important is that this process is taking place largely outside of the franchisees’ control. The materials being shipped to customers are touting that the “new” card will work in 55,000 fueling locations, and the back of the card makes the same claim along with the branding of a major retailer. The franchisee’s customers can’t avoid the exposure even if they wanted to.

Earlier this year a letter was sent to all of the merchants who accept the Fuelman card (which the new Pacific Pride card is based upon). It was touting that the new Pride Advantage card would “…for the first time allow a large, new group of customers to fuel at participating Fuelman Network Locations. This represents a tremendous opportunity for our merchants to receive the valuable benefits of truly incremental gallons.”

Maybe the marketers need to be asking: “Whose share of wallet are you talking about?” n

Shane Dyer Shane is the President of PowerUp Fleet, Inc. He possesses over 29 years’ petroleum automation, operations, and executive management experience with a focus on commercial fleet fueling and cardlock networks. PowerUp Fleet, Inc. provides sales force automation/CRM solutions specific to the petroleum industry along with sales training, sales management, and executive consulting services. Contact: 541.388.5120 or shane@powerupfleet.com and visit PowerUp Fleet at: www.powerupfleet.com.

READ MORE at fuelmarketernews.com

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Fighting the interchange battle has, for too long, been a priority for the convenience industry and retail in general.

Amazing victories are won in Washington only to face setbacks in the rule-making process as the credit associations and their member banks counterattack. However, there are options available.

One of those options, accepting PayPal at the pump through a mobile application, is currently being explored by Brentwood, Tennessee– based MAPCO in the United States, and that will soon be available at more than 1,000 Shell stations in the United Kingdom. MAPCO operates 373 convenience stores in eight states under the MAPCO Express®, MAPCO Mart®, East Coast®, Discount Food Mart™, Fast Food and Fuel™, Delta Express® and Favorite Markets® brand names.

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Paypal on the Forecourt

by Keith Reid

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PayPal on the Forecourt

Curtis noted that the adoption solution at MAPCO runs through their associates. “We get our organization really behind the fact that when a customer comes in and asks what’s happening, they don’t shrug their shoulders and push them away,” he said. “They are able to talk to them about the program and the benefits, and how it is used. We have so many millennials behind the counters, and they are really equipped and ready to share how it’s used with the consumer, and they appreciate being part of a brand that is innovative and forward thinking. That gets them excited, and that gets me excited.”

“Convenience retail is facing, I think, its greatest challenge, and that is non-traditional competition,” said Howard Curtis, MAPCO director of marketing and CRM. “The channel blurring where you have Kroger and the big-box folks selling gas, Dollar General selling cigarettes and the drug space as the convenience stop for a lot of females. Then you had Uber testing ‘UberEssentials’ up in Washington State where they would deliver convenience goods working with PayPal, so we are ripe for change right now.

It’s my opinion that we need to innovate to be relevant or face the consequences, and this is an initial step in that direction.”

The company provides a MY MAPCO mobile application that has location features, supports the company’s reward program and has the Mobile Pay function with PayPal that was integrated in May 2014. Substantial marketing of that program offering began that August.

To use that application a customer drives onto the forecourt, pulls up to a pump, opens the application and touches Mobile Pay. That will geo-locate the customer’s position and the store number will come up. The customer then selects the pump number and enters a protocol where he or she can select a certain amount of gasoline or a fill up. Once the customer hits OK, the application utilizes a shared server, which is where the integration happens between PayPal and MAPCO, and then back through the point-of-sale which turns on the pump. After the transaction is closed, a receipt arrives that always resides in the application for easy reference. An advertising video is also presented.

“

There is a motivation for PayPal mobile payment beyond just brand image—reducing credit fees. While MAPCO and PayPal won’t share the details, the program is a win for both.

The biggest challenge is probably overall awareness. For generation Xers, and maybe millennials, you still have many years of doing the transaction with a credit card or cash. It involves changing your muscle memory and the paradigm around the experience. I would like to think I’m an early adopter, but even then I have to remind myself to use the application.

”

“The second-highest expense in our organization is credit card fees, and it’s an ungodly number,” Curtis said. “I’m not savvy enough to go through the interchange process between the issuer and PayPal, but at our end we have a fee arrangement with PayPal that garners a savings to our benefit as a retailer, while letting PayPal win in the transaction as well.”

Part of the fee-saving model, and a source of customer choice, is that PayPal uses a variety of payment options within its system. The customer can add any tender type—credit card, Howard Curtis, MAPCO director debit, bank account or even PayPal of marketing and CRM balance to fund the purchase. “We’re giving a customer that choice and an If it is a rewards transaction, the application extra layer of security at the pump,” informs the consumer of a 3-cent discount said Chris Morse, PayPal senior and also provides the consumer with the manager, communications. “You don’t number of reward points that are available. have to hand the credit card to somebody, or swipe it in a The customer also gets another 2 cents off for using PayPal to device or worry about any information being misused. It’s an complete the transaction for a total of 5 cents off per gallon. extra layer of security in the same way you use it online.”

Adoption so far has been slow, but steady, which was not Bringing a well-established online payment format to brickunexpected. “The biggest challenge is probably overall and-mortar retail is all part of the master plan at PayPal. awareness,” said Curtis. “For generation Xers, and maybe millennials, you still have many years of doing the transaction “This is a good example of us wanting to add value to with a credit card or cash. It involves changing your muscle retailers,” said Morse. “As we go into the mobile space, memory and the paradigm around the experience. I would like people have an appetite to use their mobile devices. We’re to think I’m an early adopter, but even then I have to remind hoping to help drive incremental sales through the use of the myself to use the application.” mobile device and help future-proof the retailer’s business.

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help solve your problem. We used a lot of existing technology, and we listened to them and built it with their help.”

At the MAPCO side, building it involved a full-on effort between both the business and IT departments, plus accounting and finance to set up an architecture to make the integration possible. Mostly the solution involved back-end software work vs. the hardware swaps so often involved with new payment initiatives. “Because of the geo-location, there’s no need for a swipe or a wand—all that’s required is engaging with the mobile application and turning the pump on,” said Curtis.

“The application goes up to the cloud and is introduced to servers, and information is passed back and forth between us and PayPal.” The technology has also been reliable, secure and easy to manage once in place.

MAPCO recently ran a campaign where a

PayPal on the Forecourt

customer could get 5 cents off every time he or she filled up for (technically) $1 off per gallon, with the goal being $10 off per tank. That was facilitated easily and quickly using two people— one at PayPal and one at MAPCO. The application payment process is currently not available in store, though that initiative is in the works. “Not moving into the store has been an issue of time and resources, primarily on the MAPCO end,” Curtis said. He also noted that it needs to be done correctly, particularly in the store environment. “I see the value with mobile in convenience as the proper integration of payment and rewards. I laugh at myself when I use my Starbucks app and I hold up the line because I can get more ‘stars’ to kick me into the ‘gold’ and get a new free item every 12th item by scanning each item individually.” n

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?

Did You Know

The more things change in the US mobile payments space, the more they seem to stay the same. The landscape continues to rapidly evolve, with many players experimenting with and launching new products. Consumers remain tepid about paying for goods and services with their phones at the point of sale, although increased exposure to mobile payments is helping drive adoption and growth, according to a new eMarketer report, “US Mobile Payments 2014: Updated Forecast and Key Trends Driving Growth.”

Even in a persistently fragmented market, US proximity payment transaction values doubled between 2012 and 2013 to reach $1.59 billion as more consumers warmed to paying for their daily cup of coffee with their phones. eMarketer projects transaction values will double again this year to reach $3.50 billion and further accelerate through 2016 as more users come on board and make increasingly larger mobile purchases.

Source: eMarketer

RETAIL OPERATIONS

Beacons and Retail

by Vladimir Collak

Let’s face it. The Internet and mobile phones have forever changed the future of retail.

Consumers have product information at their fingertips. They can comparison shop with ease and quickly find deals online. With so many great options, sometimes there is little reason to

trudge oneself to a physical store. Conversely, consumers can also easily check out products in

brick and mortar stores, only to buy them online at lower prices. In that kind of environment,

many retailers should seriously consider innovating their marketing models. What they need is to find a better way to engage their customers by creating targeted marketing messages that understand their shoppers’ contexts. Not surprisingly, one way to do this could be leveraging technologies that expand on existing marketing and loyalty programs.

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not the garden-variety classic Bluetooth, Technologies like beacons, when but Bluetooth Smart, also known as combined with mobile apps and digital Bluetooth LE (BLE). They are designed to content can easily improve customer loyalty First, all retailers should conserve the beacon battery, allowing and engagement. First, all retailers should to run for months or even years. For them fundamentally assume that most of their fundamentally assume that most beacons to be useful, users must typically customers walk around with smartphones in of their customers walk around have an app that recognizes them. Once their hands, pockets and purses. Having with smartphones in their hands, an app detects their presence, it can these devices, shops could easily leverage perform some kind of predefined action. users’ location to send them targeted pockets and purses. Having these messages. For instance, as the customer devices, shops could easily Even though beacons represent a fairly enters a store, he or she could receive a leverage users’ location to send new technology, it has already captured notification with specific deals and them targeted messages. the attention of some big brands. Apple coupons. These would be received at the popularized it by adding BLE (Bluetooth right time as opposed to blasting them to LE) to its phones staring with the iPhone anyone and everyone online. Further, 4S and later creating an SDK (Software beacons could help retailers better Development Kit) that makes it easy for understand which individual customers developers to build apps for them. They also trademarked entered their stores, which areas of the stores they spend the the word iBeacon and created a technical specification most time in and potentially even what products they have enabling the ecosystem to grow. At the same time, some been looking at and actually purchased. Similarly, convenience hardware manufacturers including Estimote and Gimbal stores could show deals while consumers are at the pump, started to sell their inexpensive beacons and further driving them inside the store. popularized the technology. Brands followed and today organizations including Macy’s, the MLB (Major League In fact, studies have already shown that beacon-based Baseball), Duane Reade, and even Apple itself leverage the marketing is actually effective in engaging shoppers. According technology in their stores and locations. For instance, MLB to a recent article in Engadget, 60% of shoppers “open and uses beacons to present offers or seat upgrades in many of engage beacon-triggered content” with 30% actually the leagues’ baseball parks with announced installs including redeeming beacon offers when making a purchase.3 Also, 73% the Target Field in Minneapolis, Petco Park, Dodger Stadium, of shoppers polled said that offers delivered at the store and stadiums of Cardinals, Giants, Mets, Rangers and others.4 increased their likelihood of making a purchase.

Similarly, Macy’s uses an app called ShopKick “allowing customers to access locationSo what exactly are beacons and specific deals, discounts, and how do they differ from In-store Beacon devices Phone receives information recommendations while in a something like GPS (Global broadcast Bluetooth signal and sends to backend systems Macy’s retail store.”5 Likewise, Positioning System)? Today, to get Apple has been using users’ location, most apps rely on iBeacons in their stores.

GPS. However, this technology Specifically, when users enter a has trouble working indoors, store, the app can present easily drains the phone battery them with an EasyPay screen and can only identify device that allows shoppers to scan location down to 13 feet or so.1 Personalized offer an item and pay for it right On the other hand, beacons don’t or message delivered then and there. The process is suffer from any of these issues. over network nothing short of magical where Unlike GPS, beacons do not customers could pick up an provide users’ exact location, but Apple accessory from a shelf, only show a proximity to a quickly pay for it and simply beacon. They are battery efficient In-store mobile app Analytics backend systems walk out of the store without and provide a more granular experience for customer receive and process information ever talking to a clerk or an proximity down to inches. A Apple sales person. Traditional typical beacon implementation retail stores are not the only companies interested in includes one or more physical beacon(s) placed inside a store. beacons. Even Facebook recently announced its plans to use They are inexpensive physical devices often powered by coin beacons in their Place Tips service. The service will essentially batteries, AA batteries, or a regular power source. They emit show users information about shops and landmarks they are Bluetooth signals that range 30 – 500 feet and can be “picked nearby. With 1.3 billon members, Facebook has a serious up” by smartphones or tablets.2,7 The signals themselves are

”

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In fact, “Beacon programs are already quickly moving out of beta phase and becoming an integral part of the retail industry,” said Cooper Smith with Business Insider.6 Today, 80% of iOS devices, which represent 600 million, could already support iBeacons. Likewise, 24% of Android devices, or 250 million worldwide can support beacons as well.

For those who want to get involved, this should already represent a sufficient ecosystem that could deliver substantial benefits. Organizations that desire to implement beacons in their environments have plenty of vendors to choose from.

Beacon manufacturers like Estimote (estimote.com), Gimbal (gimbal.com), and Kontakt.io (kontakt.io) could provide hardware. Companies including Swirl (swirl.com) and InMarket (inmarket.com) could provide their marketing platforms.

Alternatively, many organizations can choose to create their own custom in-

Beacons and Retail

house solutions, or simply leverage software development firms like Ignite Media (ignitemediallc.com), the company I am part of.

While beacons could represent a wonderful new game changing technology, anyone who is deploying them should also be cautious. Like anything new, beacon deployments could be great for end users if implemented well, and frustrating if not.

First, companies should focus on user privacy. Make sure your customers are opting-in to receive targeted messages and likewise, that they can easily opt-out.

Also, make sure that messages sent to users are relevant and timely. Consumers probably don’t want to see a stream of notifications while moving around a store. Getting too many, repetitive, or out-of-date messages would likely be annoying. Further, ensure that implementation is planned and managed properly. Beacons use radio frequency to transmit signals. These can often be blocked by walls and other obstructions,

so ensure that the density of beacons is sufficient to cover your given area. One should consider not only deployment of beacons, but also their ongoing maintenance. Ask yourself questions such as: Who is managing my beacons on an ongoing basis? If applicable, who is changing the batteries periodically?

Are my beacons still working and how do we know when they stop? Lastly, depending on a beacon type and their deployment specifics, these devices could potentially be moved. Ensure that your very customers, competitors or some pranksters are not moving them around or away from your location. In short, plan your beacon functionality, deployment and maintenance well, and you may just have a wonderful new marketing tool for engaging your customers. n References

1. http://www.gps.gov/systems/gps/performance/accuracy/ 2. http://www.bluetooth.com/Pages/low-energy-tech-info.aspx 3. http://www.engadget.com/2014/11/25/beacon-marketingcampaigns-working-well-for-retailers/ 4. http://www.slideshare.net/DrewGiovannoli/casestudieswhitepaper?qid=0fa06037-f98e-4080-9dc60f1b77ffee81&v=default&b=&from_search=3 5. http://www.macrumors.com/2014/09/15/macysshopkick-apple-pay/ 6. http://www.businessinsider.com/beacons-market-andretail-opportunities-2015-2#ixzz3V3SWUpfE\ 7. http://blogs.wsj.com/digits/2015/01/29/facebooktests-bluetooth-beacons-to-feed-users-localcontent/?mod=evernote

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.

Vladimir holds a BS degree in Information Technology and an MBA 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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Over the past decade, America has undergone a

critical insulation against price spikes and supply major energy revolution, rapidly shifting from an disruptions due to turmoil overseas. era of domestically produced energy scarcity to an era of energy abundance. Advances in the

The key to this success, according to a study sponsored by the Manhattan Institute for Policy proven process of hydraulic fracturing—or Research, has not been the efforts of “a handful of “fracking”—in conjunction with horizontal drilling ‘Big Oil’ companies.” Instead, it is “a broad array of have allowed the United States to emerge as the small and midsize oil and gas companies that are number one producer of natural gas in the world. propelling record economic and job gains.”

America is also projected to become the world’s number one producer of oil in 2015.

These new resources have driven the economy forward, resulting in new jobs, higher revenues, and lower energy costs. Abundant oil and natural gas resources have also dramatically strengthened America’s energy security, once considered one of the country’s most alarming economic vulnerabilities. Domestic energy abundance has provided US consumers with

Source: API

Bottom Line: Our energy revolution is the type that “raises all boats” as it flows through the nation.

And, the US Oil industry has been, and continues to be, the largest jobs creator in America.

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WHOLESALE & FLEET OPERATIONS

New and Interesting Product

Eliminating Fuel Cross-Contamination

A new solution to an old and costly problem

by Chris Traczek

Owners and operators of retail fueling sites face a laundry list of daily challenges, from dealing with constantly fluctuating fuel prices to ensuring that the safety and integrity of the fueling process is reliably maintained. One of the most basic concerns is knowing that the correct fuel is being delivered into the correct underground storage tank during fuel deliveries.

Unfortunately, there have been many instances where the wrong fuel has been put in the wrong underground storage tank (UST)—an occurrence known as a “cross-drop” that cross-contaminates the existing fuel in the UST. Whether that fuel cost $2 or $4 a gallon, it can lead to thousands of dollars being needlessly spent to rectify the error.

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Eliminating Fuel Cross-Contamination Another industry veteran who has seen the damage that cross-drops can do to a fleet fueling operation’s equipment, bottom line and reputation is Rick Ross, Managing Partner for Leawood, Kansas-based Star Transport. Star Transport operates a fleet of 80 trailers and 70 pieces of power equipment, all dedicated to making retail fuel deliveries to a customer base that spans a region from Houston, Texas, to St. Louis, Missouri, and Colorado to Arkansas, and includes such well known brands as QuikTrip, Kroger’s and Circle K. To adequately serve its wide customer network, Star Transport operates terminal facilities in Oklahoma City, Springfield, Missouri, Kansas City, Houston and Denver.

“Cross-contamination is an unfortunate part of the industry,” said John Hamel, President of J&S Transport Co., Inc., in Lynn, Massachusetts. “We all want to think it doesn’t happen, but unfortunately, there are times that it does.”

J&S Transport is an exclusive hauler of refined petroleum products with a customer base that covers all of the major shippers in the Boston market and a network of branded and unbranded gasoline stations. The company also provides inventory management for a number of its delivery locations where it actually monitors inventory levels, schedules deliveries and observes market conditions before scheduling a delivery.

Hamel and his drivers are well aware of the costs that are incurred from the simple crosscontamination of fuel, but there are a number of ancillary costs that also must be accounted for when the wrong fuel finds its way into the wrong UST. These include: • Cost to pump out the contaminated tank, • Use of a trailer to pump the bad fuel into, • Cost to replace the bad fuel, • Loss of fuel-purchase revenue during station downtime, and

“Trying to eliminate cross-drops when you look at gas on diesel or diesel on gas is an industry problem system-wide,” admitted Ross. “Years ago, the cost of taking care of a crossdrop was not significant; today, it is significant.”

“

Tackling the Problem

Realizing that cross-drops can cost fleets tens to hundreds of thousands of dollars a year in lost fuel and remediation fees was the easy part. The much tougher challenge was devising a solution. It was a task that intrigued Civacon, Kansas City, Missouri, a member of the OPW transportation business unit and a global leader in the design, engineering and manufacturing of bottom-loading, vapor-recovery and overfill-detection systems for use in the petroleum products delivery industry.

”

Trying to eliminate cross-drops when you look at gas on diesel or diesel on gas is an industry problem system-wide. Years ago, the cost of taking care of a cross-drop was not significant; today, it is significant.

Rick Ross, Managing Partner Star Transport

• Cost to dispose of the ruined fuel, which can be the difficult to “find a home for” at times.

There are strict protocols that need to be followed when disposing of ruined fuel, which is why the US Environmental Protection Agency in 2002 helped create the Environmental Compliance for Automotive Recyclers website (www.ecarcenter.org). The ECAR is a compliance-assistance center for the automotive-recycling industry and includes stateby-state regulations that govern the handling and disposal of ruined motor fuels.

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“For years, we had been hearing from our customers just how damaging crossdrops could be to their businesses, from not only a lost-fuel perspective, but also from the loss of reputation that could result and harm to future business prospects,” said Randy Robinson, National Sales Manager for Civacon, part of OPW. “Our charge, then, was to develop a system that not only eliminated costly cross-drops, but also did it in a way that would not adversely affect delivery times or be too complicated for the driver to implement.”

To help move the development process along, Civacon solicited input on the industry’s needs from companies that were on the front lines in the battle against cross-drops.

“Civacon came to us and asked what were some of the things we’d like to change or do or improve on, so when they asked us what we needed, we were quite excited to hear that they had chosen to take on this cross-drop technology problem,” said Ross.

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Eliminating Fuel Cross-Contamination

“We were fortunate to be approached

by Civacon with a new initiative and the new product line they were developing,” added Hamel. “We were asked if we would test this new product. The experience so far has been very positive, great response from our drivers and the shipping community we haul for are appreciative of the fact that we are forward-thinking and looking out for the liability with their customers.”

Call for COPS The collaboration between Civacon and its customers ultimately resulted in the creation of the Cross-Over Prevention System, or COPS, which was introduced to the fuel hauling industry at the National Tank Truck Carriers Show in Houston in October 2014.

COPS has been designed to remove human error from the retail site delivery process with no modifications required at the rack and minimal additions to the site’s USTs. The heart of the system is a Smart Elbow that communicates via RFID tag with the controller on the fuel trailer. If the information from the RFID tag does not match the fuel with the UST, a delivery cannot be initiated (see sidebar, pg. 64).

“I’ve been with Star for 10 years and I’ve seen cross-contamination cost the company a lot of money,” added driver Kevin Youngstrom. “It’s also cost me a little bit of money and time because you have to get it back out of the ground, and also, there’s damage to vehicles. There’s a lot involved if you make a mistake. As a driver, having the Civacon system on my truck makes me feel more confident that I’ll be able to do my job correctly, which benefits me and my company.”

Civacon COPS Installed “It just allows you to think before you drop,” said Steve Medley, a driver for Star Transport. “It doesn’t let you make a mistake. It makes you slow down and think about things before you just go at it.”

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WHOLESALE & FLEET OPERATIONS In addition to preventing cross-drops, the system also has locking API adaptors that protect the trailer from product theft, which is another ancillary cost that fuel transporters are attempting to eliminate.

Conclusion Fuel transport companies and their customers have enough to worry about without wondering if the right fuel is going into the right tank during a delivery. While human error is generally the cause of crossdrops, that aspect is removed from the delivery equation with the implementation of Civacon’s COPS, which uses tried-andtrue RFID wireless communication technology to ensure that the correct delivery is made each and every time.

Eliminating Fuel Cross-Contamination

“We’ve always been a very safe carrier, always been able to attract good people, always had high-quality equipment, and adding the COPS system to our trailers, or ordering new trailers with the COPS system on them, is just one more step that makes us stronger, makes us better than anybody else in the industry,” said Ross. “We see nothing but upside with this system.” n

READ MORE at fuelmarketernews.com

Chris Traczek Chris is a freelance writer who was a former Editor-In-Chief for National Petroleum News and Fuel Oil News magazines. He has been reporting on the retail petroleum industry for 15+ years. He can be reached at ctraczek@deanhouston.com.

COPS First and foremost, Civacon developed its Cross-Over Prevention System (COPS) as a way to prevent costly cross-drops of fuel during retail fuel deliveries. The added benefit of COPS, however, is that it also increases the efficiency and cost effectiveness of the delivery process, resulting in a streamlined operation and healthier bottom line.

All that’s required are three simple steps to complete a fuel delivery with a tank trailer and retail site that have been outfitted with COPS:

1 Connect: The API coupler on the trailer is connected to the Smart Elbow by a delivery hose. The Smart Elbow connects to the UST’s adaptor when an RFID tag is permanently installed.

COPS also ensures that the Smart Elbow is securely attached to the UST adaptor, which cuts down on the chance for spills.

2 Communicate: The Smart Elbow transmits the RFID tag’s fuel grade to the main controller. The fuel will only be allowed to flow when there is a match with the RFID tag.

3 Prevention: Cross-contamination is automatically prevented by COPS when a driver tries to open a non-matching product compartment.

“From a driver’s perspective, the system works well,” said Bob Bryson, a driver for J&S Transport Co. “It does give you peace of mind that you’re not going to cross-drop and it doesn’t add any more time. I wish more stations actually had that. I mean it’s great—it’s a great system.”

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WHOLESALE & FLEET OPERATIONS

EPA Enforces New Diesel Power Generator Emissions

by Dr. Niels Tholen Regulations

The US Environmental Protection Agency is introducing brand new power generator emissions standards between 2015 and 2016.

It is now a requirement to fit all new diesel generators with advanced after-treatment technology to reduce harmful emissions.

Tier 2

Tier 1 1996

1998

NGO and certain states call for federal emissions standards for non-road

2000

2002

The primary emission reduction technology that the power generator market is turning to is selective catalytic reduction (SCR), which requires diesel exhaust fluid (DEF) to operate. This is likely to have an impact on DEF demand, opening up new markets for industry players, while also raising challenges in terms of supply and logistics.

Following the enforcement of the new Tier 4 Final regulations, leading independent emissions controls and DEF market consultancy, Integer Research, has published Power Generators and Diesel Exhaust Fluid (DEF) Demand in North America: The Way Forward.

Tier 3 2004

Big push to reduce PM and NOx gases further due to poor air quality in the USA

2006

Tier 4 interim 2008

AGCO first OEM to use SCR

2010

Tier 4 final

2012

Fuel saving as an indirect effect of SCR use sees more OEMs such as CNH adopt SCR

2014

2016 2017 2018

Caterpillar, Perkins, Cummins and John Deere adopt SCR technology Source: EPA

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A complex market North America produces around 1 million generators each year, which are used in electric power (73%), oil and gas (11%), irrigation (11%) and industrial markets (5%). Around 90% of these units are small generator sets below 50 kW. Many generators are not sold in the domestic market but instead are exported to countries such as China, India and across Latin America. The domestic market accounts for around 33,000 generators (above 50 kW) a year. These generator units have traditionally either been partially included in off-highway emission standards or have been covered by their own specific emission standards.

Generators can be split into three categories:

• Standby generators used in case of emergency; • Complementary generators

used for “peak shaving”at times when electricity costs are so high that it is more cost effective to move away from the power grid to a generator;

• Prime power generators generators used as the sole power provider to areas that are disconnected from the power grid.

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WHOLESALE & FLEET OPERATIONS Diesel powers the vast majority of the global generator market—at 78%—with most of the remaining 22% powered by gasoline and more recently natural gas.

Natural gas as a fuel for generators has been making inroads into the medium and high power generator markets. However, issues such as costly equipment, the low energy value of gas resulting in the need for large storage tanks, methane slip, and the lack of a supply chain will have to be overcome before natural gas becomes a serious contender to diesel fuel.

SCR—the system of choice Because SCR is the system of choice for most off-highway machinery, it is unsurprising that the power generator market is following suit. Exhaust gas recirculation is an alternative to SCR but is only used on a smaller scale. SCR reduces the toxic NOx gases responsible for the formation of smog and other pollution. It works by injecting DEF (a 32.5% solution of high-grade urea and demineralised water) into the exhaust system, where the high temperatures cause the solution to evaporate and decompose urea into ammonia. The ammonia and NOx gases are then converted by the SCR catalyst into harmless water and nitrogen gas.

The introduction of new regulations and SCR technology into a predominantly diesel-fueled power generator market points to an increase in demand for DEF. The market research recently undertaken

by Integer Research details the impact the power generator market is likely to have on DEF consumption.

“

EPA Enforces New Diesel Power Generator Emissions Regulations

The primary emission reduction technology that the power generator market is turning to is selective catalytic reduction (SCR), which requires diesel exhaust fluid (DEF) to operate.

This is likely to have an impact on DEF demand, opening up new markets for industry players, while also raising challenges in terms of supply and logistics.

”

working on closing loop systems, which would prevent dirt from getting into DEF. Problems also arise when DEF is substituted for poor quality fluids. SCR technology is a sensitive and expensive piece of equipment and the use of unlicensed, below-standard DEF will contaminate the system, again causing major shut downs.

Power Generators and DEF Demand in North America: The Way Forward The DEF market in North America has expanded rapidly since its inception in 2010 and is reaching maturity in sectors such as heavy-medium-duty trucking.

However, the DEF market for power generators involves very different dynamics and will raise different issues, many of which are identified in Integer’s new report. n

Supply issues and the dangers of sub-standard DEF With the expansion of SCR usage, DEF supply into the power generator market will become a priority. At the time of writing, the off-highway sector has been using DEF for three years and lessons are being learnt all the time on how to supply to often remote and difficult to access site locations. As well as supply logistics, another major hurdle to overcome will be keeping DEF clean. The sites where the generators operate are often dusty, which could result in contaminated DEF, causing system shutdowns and resulting in expensive repair bills. OEMs are

Dr. Niels Tholen Dr. Tholen received his B.Sc. from Zuyd University (NL), M.Sc. from the University of Utrecht (NL) and finally his Ph.D. in Chemistry from Imperial College, London. He has previously worked at the expert network firm Gerson Lehrman Group where he was involved in business development across several global top corporate accounts. He is an industry analyst and works on assignments across all Integer’s business areas. For more information on the report Power Generators and Diesel Exhaust Fluid Demand in North America: The Way Forward, including a table of contents, visit: www.integer-research.com or email: publications@integer-research.com.

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At last count, total US crude stocks stood at 468 Mb, an all-time record high. Storage of both crude oil and refined products is at (or very near) capacity in most regions of the US. The partial rebound in oil prices that occurred in late January and early February seems to have marked a pause. Prices have since become range-bound, with Brent futures trading around $60/bbl and WTI closer to $50/bbl, and at the time of writing, slightly below those levels. On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however.

Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly. Steep drops in the US rig count have been a key driver of the price rebound.

slowing down. Plunging US crude throughputs—due to seasonal and unplanned refinery outages, as well as weak margins and high gasoline stock builds in December—have seen US crude inventories soar, compounding the impact of robust supply growth.

Source: IEA Oil Market Report, March 13, 2015

Bottom Line: Prices may go up, prices may go down, but at the end of the day America has a lot of oil left in the ground. With record production levels, refineries running at capacity and regulatory restrictions on exports, a balance will need to be found or we will soon hit the wall on US consumption and storage.

Yet US supply so far shows precious little sign of

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TERMINALS & BULKPLANTS

Don’t Neglect Your Smaller Terminals and Bulk Plants

by Keith Reid

Terminals and bulk plants perform important, but relatively unglamorous tasks in the industry. Retail fueling at a convenience store, even a tanker dropping a load of fuel at a retail site provides the public face of the industry.

These more dynamic areas also typically see a continuous stream of innovation among a range of solution providers.

To a great extent that’s because the consumer marketing push at retail and the highly competitive nature of supply push so much change.

While larger terminals typically receive significant attention from their operators, it’s not uncommon to see less attention paid to issues like automation with smaller, singleoperation terminals and certainly to a marketer’s bulk plant. In many cases if what’s in place today (and maybe for a decade or more in the past) is working acceptably, then the budget hit to upgrade can seem daunting. That is particularly the case during a lull period in margins, or with operations where the retail operations or delivery fleets seem to need more financial attention.

“There are a lot of smaller terminals that are feeling the pinch. This is obviously a very cyclical process where everybody wants the latest and greatest, and they are fine for quite a while because there is a longer business cycle for product ownership,” said Micki Verhagen, the product manager for Schneider Electric’s DTN Guardian3. “You’re probably about 50 – 50 automation today.

There are not many people without a degree of automation these days, mostly from a regulatory standpoint.”

And yet, significant capabilities are allowed through updating to the latest technologies to facilitate automation—such as software— and the move from mechanical to electronic equipment in the fuel distribution infrastructure. Away from automation, a range of purely mechanical equipment, such as that found at the loading rack, have seen significant enhancements that impact reliability, safety and efficiency. Technologies that were innovative, even just a decade ago, have been supplanted by the next generation(s).

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Automation Benefits There are a number of automation software solutions available for the smaller terminal or bulk plant from a range of vendors. Among those, Schneider Electric offers its DTN Guardian3. Total Meter Services has the TMS6000 suite of software products.

Toptech, part of the IDEX Corporation along with Liquid Controls, offers hardware and software for terminals and bulk plants. And yet…

“We have run into people who are actually running several facilities on Excel spreadsheets,” said Dave Rajala, technical liaison manager, proving technologies, Total Meter Services, Inc. TMS is a software and automation service company specializing in storage and handling of liquids including design/build. “One company that is now a customer went through a fairly heavy heating season a year ago in the Northeast running five or six small

“

We have run into people who are actually running several facilities on Excel spreadsheets. One company that is now a customer went through a fairly heavy heating season a year ago in the Northeast running five or six small distribution terminals using Excel spreadsheets. They had difficulties in keeping track of fuel, obviously, because it was such a heavy heating season.

”

Dave Rajala, Total Meter Services Inc.

distribution terminals using Excel spreadsheets. They had difficulties in keeping track of fuel, obviously, because it was such a heavy heating season.”

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Given the capital costs involved, what can be gained in return?

Automation typically touches inventory management, transaction records, bills of lading and site control. Automating those processes can lead to more accuracy and efficiency, less product shrink and fewer headaches with the myriad of regulatory burdens tank operators face.

“One of the things that is important is material balance,” Rajala said. “So if you have regulatory systems in terms of taxation, where the terminals are paying tax at the terminal level rather than at the retail level with some of these fuels, without automation it’s very difficult to create those tax documents. You have to be very precise about which customer got what fuel at a specific point in time, and what we do is hand that data to their back office software. We don’t do the back office calculations, but we hand them a data stream. Without good

TERMINALS & BULKPLANTS accurate data, how do they pay the tax authorities?”

And, as the saying goes, time is money— literally. “Most automation systems help get the information into the back office more rapidly than manual process,” said Verhagen. “The sooner you can bill, the sooner you get paid, so there’s a time value of money aspect.”

Beyond basic transaction reporting, the amount of data harvested can be mined for much more sophisticated purposes.

“Customers who use automation can get reports daily, weekly, monthly or whatever,” said Rajala. “The customer can access automatic reporting systems without having to do any manipulation, for want of a better word. You may get prompts to say ‘give me these dates,’ but even that can be automated. So that every night at midnight or something the daily report gets generated, so it’s on the desk the next morning.”

Verhagen echoed the importance of reporting, noting that it will be a leading focus of additional development with the Guardian product in coming years.

“Everybody wants information, and the newer generation terminal automation system offers a vast amount of reports already canned and ready to be sent to customers,” she said. “Or, custom reports where you can pick and choose the data and how you want to see it. It can be presented in a number of different formats from standard printouts to PDF files that can be sent to any stakeholder, and the data itself can be sent in an almost any data format, such as XML, that will let it be integrated into a variety of systems.”

Rajala noted that these systems can facilitate gate access, clearly identify the customer, facilitate the correct product loading, provide live-stream video and even control allocation arrangements to shut off the pumps when the agreedupon amount is reached for a customer.

All of this capability allows the automation to truly automate a site, and can impact the need for personnel to monitor the operations.

Don’t Neglect Your Smaller Terminals and Bulk Plants

“

“We don’t want to really encourage getting rid of employees, but that becomes one option,” said Verhagen.

“Automating and efficiency also allow you to actually increase your business without increasing your staff. And, terminal and supply managers and schedulers can be freed up to work on more important operational areas instead of manual processes.”

We don’t want to really encourage getting rid of employees, but that becomes one option. Automating and efficiency also allow you to actually increase your business without increasing your staff. And, terminal and supply managers and schedulers can be freed up to work on more important operational areas instead of manual processes.

”

Micki Verhagen, Schneider Electric

And beyond that, whether someone is sitting in a building at the site—or not— automation allows senior management access to critical information from practically any location.

progress has been made in these areas as well, and in many cases modern hardware is key to making an automation process work.

“Obviously, a newer generation of software is going to talk to advanced hardware to get better monitoring and control as far as what is happening at the rack,” said Verhagen. “And now you have access to that remotely so you don’t necessarily have to be at the facility all the time to handle certain types of alarms. Of course, other alarms require all hands on deck. If you’re not watching it, suddenly you may have a seeping valve or something that you would not otherwise notice.”

Automation can also facilitate proper maintenance and reduce unexpected downtime throughout the plant or terminal’s fueling infrastructure.

Automated solutions linking software to electronic/digital-enabled components tend to provide more granular information on the service cycles and operation of the various components in use at the site. These automated solutions can provide operators with insight as to potential failure points and ultimately more time to conduct preventative maintenance instead of responding to emergency failures.

Several areas of advancement where hardware can link with software are the meters, registers and presets.

“In today’s Internet and cloud environment, for want of a better description, there are all kinds of options for remote access,” said Rajala. “That allows the operator who might be sitting at home or on a mobile device to pull up information from the terminal. That is all available from the package that we provide. There are various levels, but all of that is sitting there and we can make it available to the customer in any form that is useful.”

Liquid Controls, for example, provides meters, registers, digital-control valves and flow computer options. Engineered packages are available for high-end, automated batching and blending systems, as well as for basic electronic preset or mechanical registration systems. A meter-mounted LCG POD pulser is available for pulse output to electronic register.

Automation software might be considered the brain and nervous system of the process, but the actual organs of site operations—the valves, registers, meters, and tank gauging equipment (among others)—make up the bones, muscles and organs. A fair amount of

Similarly, FMC Technologies Smith Meter Products provides the Genesis Series meters: AccuLoad™ Electronic Preset products and the Evolution ETR-1000 register, which can all be integrated for an efficient and easy-to-use automation package.

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While all of these technologies have mechanical roots, electronics and digital integration can provide some advantages.

“A lot of the smaller companies that operate bulk plants typically run mechanical registers and presets for all of their products, and in certain cases the smaller terminals are still mechanical as well,” said Kevin Nugent, Liquid Control’s regional sales manager for stationary applications. “The more progressive operations see the benefits of going to electronics—in many cases from observing the newer trucks that they’ve purchased. They buy a truck and see how well the electronics work and then consider upgrading the bulk plant to get similar capabilities. Now they have a synergy throughout the company centered on electronics.”

Nugent noted that the biggest drawback to mechanical components is that they can wear out faster. They are outside all of the time; they see temperature

changes and other weather conditions and the effects of the components’ physical wear against each other. “When you have a meter, say at a smaller bulk plant with a mechanical preset, a lot of times we will offer electronic because you have basically the same price as mechanical,” he said. “When mechanical components wear they will either give away extra product or simply wear to the point where there’s going to be a failure. Also, when you have a very high resolution pulser that is counting the rotation of the meter—and the higher the resolution the better—your accuracy improves and because of the lack of wear, you sustain your accuracy for a greater length of time.”

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Don’t Neglect Your Smaller Terminals and Bulk Plants

Nugent noted that the electronic components in many, but not all, cases tend to be cost competitive or even cheaper than the traditional mechanical solutions. As an exception, some of the larger valves in the 3" or 4" size are a bit more costly versus mechanical, but there are still cost savings over time from efficiency and lack of wear.

Looking at other bulk plant/terminal hardware solutions, where tank gauges are concerned, both OPW and VeederRoot have modern offerings with enhanced capabilities.

OPW’s SiteSentinel® iSite automatic tank gauging system provides complete inventory, delivery, automatic reconciliation and environmental compliance information for as many as 256 underground storage tanks (UST) and/or aboveground storage tanks (AST), 1,000 external sensing devices or a combination of both, through a single console.

Veeder-Root’s Mag-FLEX is specifically designed for monitoring fuel levels in aboveground storage tanks. The MagFLEX monitoring solution can be paired with any Veeder-Root automatic tank gauge to create a powerful, affordable, reliable inventory management system backed by the company’s support network.

Verhagen noted that even additive injection benefits from automation. An automation system allows the hardware to talk to the blend tanks or mini-packs to easily inject the proper amount of any additive simply by making small tweaks.

There is no need to go through a whole

testing process every time an operator wants to change a rate. “Obviously you have to measure and monitor for the gasoline the IVD (detergent additives) inputs and that is a regulatory issue that you report upon every month,” she said.

“But, many of your throughputters may have special additives. An additive is what makes a product special, so everybody is trying to come up with the new gas additive or the diesel additive.

From a marketing perspective, you have to be able to handle the different rates and reporting requirements especially with ‘TOP TIER.’ It’s not a governing body per se, but there is a body you have to report back to, so having that data readily available makes life so much easier. This provides tremendous flexibility.”

Pumps are another area to consider for an upgrade, though not necessarily from an automation standpoint. Pump technology has come a long way, and rebuilding that decades-old pump one more time might not be the best option, even if it saves a few dollars up front.

New pump designs provide enhanced capabilities that improve reliability, energy efficiency and make maintenance easier, when required.

For example, the Blackmer® NP Series Sliding Vane Pumps feature the company’s sliding-vane-technology principles, which guarantee consistent volumetric-output performance, even after significant in-service time.

The Griswold™ 811 Series centrifugal pumps feature open impellers with two times the wear area of a closed design, which optimizes the performance of the pump’s open impeller and allows renewable performance.

Gorman-Rupp manufactures a full line of pumps specifically designed to safely and efficiently pump petroleum products in critical applications at bulk plants, tank farms, barges, tank cars and fuel trucks.

For bulk operations, its Roto-Prime® series provides dependable, positive priming and re-priming, along with safe handling of volatile fluids.

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Product Loading Loading racks, loading arms, couplers and ancillary rack equipment might or might not be core to an automation solution, but advances in technology make loading safer and more efficient than ever.

OPW offers a complete line of loading arms and loading-rack equipment for bulk loading and unloading requirements.

A recent innovation was the company’s Kamvalok Dry Disconnect Couplings, used at liquid transfer points where product loss could occur.

Don’t Neglect Your Smaller Terminals and Bulk Plants The Scully Groundhog is a self-proving grounding system that monitors the ground connection throughout the loading operation for maximum safety. The rack mounted control monitor can operate in conjunction with existing Scully overfill prevention systems or as an independent control unit.

With all of the options available for upgrades, does it make more sense to do them all at once, or individually? “That really depends on your budget, and your appetite for change,” said Verhagen. “We’ve had

Emco Wheaton offers a range of high quality loading arms and supporting products. Its E2304 Bottom Spring Loader is well suited for an existing terminal that is being converted from top loading to bottom loading, where space is limited.

customers upgrade everything from the rack to the automation system, and everything in between. And there are others that said we are going to do it piece by piece. It really is dependent upon the customer. Obviously, if funds were unlimited it would be great to do everything all at once, but that is not the reality, especially now with the crude prices going up and down. Everybody’s budget seems to have gotten a lot tighter over the last six months. And of course, you have the downtime to consider as well.” n

READ MORE at fuelmarketernews.com

With nearly eight decades of practical field experience in the petroleum and bulk fill industry, OILCO Liquid Handling Systems developed the Safe-T-Lift®. It features a traction balance assembly to provide a simple and effective balancing system to increase operator safety and ease of use.

OSHA data indicates that more than 80% of falls come from climbing and descending.

Saferack develops engineered systems that provide a full range of customized loading and unloading capabilities at the rack. A particular niche for the company is providing a safe loading and unloading environment. For example, the company can design a rack featuring safety cages and a built-in toolbox for top-fill applications like railcars. The person doing the fueling does not have to carry a heavy load of tools while climbing up to the top of the rack, and simply walks across a gangway into a safety cage to begin work.

From another safety perspective, Scully provides equipment that helps ensure proper grounding when filling a truck.

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BUSINESS OPERATIONS

Underground Storage Tanks

A Changing Marketplace The environmental insurance

marketplace has never seen more capacity and competition than now, yet changes are on the horizon for the underwriting and risk transfer mechanisms associated with underground storage tanks (UST).

Just a year ago, there were nearly 20 qualified insurance companies aggressively writing these tanks. At renewal, coverage terms could be broadened, deductibles reduced and premiums held flat—a more impressive feat than on other lines of insurance due to the fact that the chance a tank will leak grows exponentially each year as tanks age.

by Greg Cushard and Michael Manis Today, we see the market at the brink of change, especially when dealing with small portfolios with tanks more than 25 years old. Over the last few months, the industry has seen deductibles and premiums rise, with carriers looking to collateralize retentions and some insurance companies nonrenewing their books of business. The writing of financial assurance for USTs is becoming more and more cumbersome.

Owners and operators of newer tanks can still expect competitive renewals with affordable premiums and low deductibles. However, for older tank systems, deductibles can quickly grow more than $50,000 per claim and, in extreme cases, closer to $1 million per claim, requiring insureds to fully collateralize the deductible with an approved letter of credit.

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BUSINESS OPERATIONS

What is Financial Assurance and Who Needs It? The federal government, through the enforcement of the Environmental Protection Agency, requires owners or operators of USTs to evidence financial responsibility as outlined in the Code of Federal Regulations 40 CFR Part 280282, 302. With some exceptions, USTs holding petroleum are subject to these financial responsibility requirements.

Financial responsibility can be achieved through any one of the following mechanisms (see 40 CFR Part 280 Subpart H for more detail): • State financial assurance funds. If a state fund program is available and solvent, a formal review of its financials, fee schedules, reimbursement procedures, and claims handling process should take place. A complete list of states offering funds can be found at this website: http://www.epa.gov/oust/states/fndstatus.htm.

• Insurance coverage through a private insurer • A guarantee for the coverage amount from another firm with whom you have a substantial business relationship.

The provider of the guarantee has to pass one of the financial tests outlined in the Code of Federal Regulations, 40 CFR Part 280.

• A surety bond • A letter of credit. These letters of credit are becoming increasingly popular as a mechanism of last resort for tanks well past their useful life.

• Self-insurance. If an owner/operator has a strong balance sheet, it can prove financial responsibility by passing one of two financial tests as outlined in 40 CFR Part 280.95.

• A trust fund. An owner or operator can set up a fully funded trust fund administered by a third party to demonstrate financial responsibility.

• Other state methods. Less commonly used options may be approved by your state for compliance with financial responsibility.

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BUSINESS OPERATIONS

Underground Storage Tanks—A Changing Marketplace

What is Changing and Why? While state funds have historically been a successful and reliable mechanism to rely on, more and more state-managed funds are entering financial trouble. Many of these funds have simply run out of money and cannot keep up with the growing UST claims.

When a state fund closes down, tank owners and operators can be left with unpaid invoices, sometimes amounting well into the tens of thousands. On top of these issues, state funds are based on a reimbursement principle (meaning tank owners and operators must first front the cost for claims and wait for the state to later reimburse them) and are often further limited to strict fee schedules that reduce the total reimbursement to a fraction of the total costs incurred.

“

Over the last decade, the private insurance marketplace has seen a number of carriers aggressively underwrite tank systems only to pull out of the market a few years later due to growing losses. While a few have remained over the years, a number of markets struggle to write these risks profitably.

”

Which tanks are impacted and why are these changes occurring?

• The USTs most impacted are those 25 years and older, especially single-walled steel with cathodic protection (or similar construction). The industry views the average useful life span of tanks between 26 and 30 years.

Depending on soil conditions, this useful life may be shorter or longer, but it is known that as the tank ages, the likelihood the system is leaking grows exponentially.

As state funds close and old UST systems age, more and more insureds will be finding themselves with unexpected insurance premiums and growing deductibles or, worst-case scenario, uninsurable tanks.

• Many components of the UST system have a shorter lifespan than the physical tank itself. Most notably, the spill bucket is often the weak link in these systems and needs to be replaced more regularly.

• The changing nature of the fuels held in USTs affects their overall useful life; the corresponding system components greater than 20 years old were designed to hold a different composition of fuel than what is being delivered today. Some tanks are degrading faster with these new blends (i.e., increasing ethanol percentage).

Over the last decade, the private insurance marketplace has seen a number of carriers aggressively underwrite tank systems only to pull out of the market a few years later due to growing losses. While a few have remained over the years, a number of markets struggle to write these risks profitably. It should be noted that a number of markets still aggressively target newer tanks, but the market shift towards those tanks 25 years and older is drastically changing.

• Some states have put increased pressure on those insurance companies who issue Financial Assurance, requiring policies to broaden terms and conditions and pay for claims that would ordinarily be excluded.

• Additionally, as the sensitivity of testing equipment is improved and cleanups are held to higher standards, both frequency and severity of UST claims are on the rise.

Looking to the Future

Insurance companies are taking a more careful underwriting approach for those tanks more than 25 years old and trying to find a way to write them profitably.

Some of the more conservative insurance companies are reducing coverage and placing tank removal exclusion endorsements on policies, thus handcuffing insureds to their aging tanks.

From traditional risk transfer of an insurance policy to the posting of letters of credits or surety bonds, it is crucial to look at options early and be prepared for the changes to come. While a complete UST replacement is expensive and cumbersome, at some point it becomes unavoidable. These costs, and when they should be incurred, will need to be weighed against growing insurance premiums and retentions.

These endorsements exclude claims discovered during tank replacements, leaving owners/operators on the hook when there is the highest chance of discovering a leaking tank system.

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BUSINESS OPERATIONS A more comprehensive review and overall guide to tank insurance are subject to a further conversation.

Interested parties should refer to “Dollars and Sense—Financial Responsibility Requirements for Underground Storage Tanks” issued by the EPA or “Guide to Tank Insurance” written by the Association of State and Territorial Solid Waste Management Officials for more detailed information. n References Financial Responsibility For Underground Storage Tanks: A Reference Manual— http://www.epa.gov/oust/pubs/frustman.pdf Regulations Pertaining To Underground Storage Tanks— http://www.epa.gov/oust/fedlaws/cfr.htm Guide to Tank Insurance— http://www.astswmo.org/Files/Policies_and_publications/Tanks/ 2011.10_Guide_to_Tank_Insurance_FINAL.pdf Dollars and Sense—Financial Responsibility Requirements for Underground Storage Tanks— http://www.epa.gov/oust/pubs/dollars.htm

READ MORE

Underground Storage Tanks—A Changing Marketplace

Greg Cushard

Michael Manis

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

Michael has spent the last two years at Lockton expanding their West Coast energy and environmental practice. Coming from an engineering background, he brings technical experience that aids in the understanding of risk profiles and market discussions. As an account executive, Manis handles a book of business encompassing a wide range of energy and environmental clients, with a concentration of clients in the retail gas station/c-store, terminal, oil and gas and renewable energy sectors.

Additionally, he is the lead Environmental Consultant for Lockton’s West Coast offices where he aids in the risk management and policy placement of highly exposed environmental risks.

at fuelmarketernews.com

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BUSINESS OPERATIONS

Yes, there are opportunities for you as a Borrower to use your bank financing to actually make money for your business, but you must think about your bank financing differently and you must prepare now.

Make Money

on your Bank Financing

by Corey Henriksen

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BUSINESS OPERATIONS

If it makes sense for you to borrow money in order to make a greater profit for your business, then don’t just focus on obtaining the least liability cost of your financing. Instead, refocus your thinking in order to treat your bank financing as a separate profit center that in reality makes money for your business. How? Let’s walk through the analysis.

Customization and flexibility are the true benefits of interest rate swaps.

First,

does it make sense to obtain bank financing for your business?

One method is to lock in low fixed rates long-term on your loans with your Lender. This makes good business sense in a rising interest rate environment. As interest rates rise, you are paying the locked-in lower rate for your loan payments as compared to the higher rates that will be offered as rates rise.

You are therefore making money on that differential. The higher interest rates rise, the more you would be paying if you had not locked in low fixed rates. That money instead stays in your pocket.

Put simply, if you make a greater profit using bank financing than if you don’t, it is sensible to use bank financing. Why? Because even though you pay out more in expenses, you obtain a greater overall profit.

So, if it is reasonable and sensible to borrow money in order to utilize assets to obtain a greater profit for your business, then you are going to be consistently borrowing money. If this is the case, then you have to take a very hard look at how you manage your bank financing. You must structure your bank financing as a separate profit center and then look for every benefit that you can obtain and monetize.

Okay. Structure your loans with your lender utilizing his fixed rate financing terms. Fair statement. Unfortunately, most lenders have specific guidelines on the “products” (read loans) that they can offer Borrowers. You have to fit in their box and take the fixed rate product that they present you, or not at all.

Good for the lender. Not so good for you.

Second,

An alternative to accepting a lender’s fixed rate terms that makes sense in a rising interest rate environment is to enter into an interest rate swap. As always, the devil is in the details; however, the basics are pretty straightforward.

how can you structure your bank financing to take advantage of a rising interest rate environment?

Interest rates have been historically low for a number of years now. This will not go on forever. Sooner or later, we will be in a rising interest rate environment. The question on every Marketer’s mind is… when will interest rates start rising, how fast and how much? Short answer: no one really knows. But it could be very soon. So, be prepared. But be prepared by structuring your bank financing to take advantage of the rising interest rate environment.

The traditional mindset is: Don’t be caught in debt when interest rates rise. However, there are ways to mitigate rising interest rates, and even take advantage of them.

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BUSINESS OPERATIONS

For purposes of this article, we’re going to discuss a plain vanilla swap. The Borrower enters into a variable rate loan with the Lender.

The Borrower then executes a separate financial contract with the Lender (or a thirdparty) to convert all or part of his variable rate debt to fixed rate debt. Thus the Borrower in essence ends up with a fixed rate loan with the benefits described above. It is important to note that an interest rate swap is not a loan from the Lender, but rather a contract to “swap” interest rates with a swap party (here the Lender).

“ ”

Make Money on your Bank Financing

Long gone are the days when you had a relationship with your banker for 20 to 30 years and he would take care of you.

Customizing your financing for your specific needs both long-term and shortterm is a necessity. Long gone are the days when you had a relationship with your banker for 20 – 30 years and he would take care of you. With the recent upheaval, many bankers have been laid off, or transferred to other lenders. Many banks have been purchased by other banks. Corporate policies in banks have changed drastically. Specialty Lenders providing financing to the petroleum industry have been sold off multiple times to different lenders.

Customization and flexibility are the true benefits of interest rate swaps. There is no typical interest rate swap. They come in unlimited forms, and can be customized precisely for the needs of the Borrower. This means that an interest rate swap can be put in place for the entire term of the loan, or for any incremental part of the term, or even for longer than the term of the loan. The swap can start at the closing of the loan or at any time during the loan. For example, if you think that interest rates will remain low for another year, the swap could start a year after closing and then continue for the term of the loan.

This would enable you to take advantage of low variable interest rates for the year before converting to a fixed rate.

Why look at your financing from the perspective of making your business money? Because Marketers make their money with thin margins—cents per gallon—you can’t afford to leave big dollars on the table because of an improper financing structure. Your financing has to be scrutinized and managed as a separate profit center.

A swap can be terminated at any time during the loan. For example, let’s assume: (a) a 10-year loan term and 10-year swap on a piece of collateral, (b) the Borrower sells the collateral at the end of year three, and (c) that interest rates have been rising for the past three years and will continue to rise for the next seven years. Under this scenario and with a properly structured swap, the Borrower could transfer the swap to another piece of collateral (and maintain the low interest rate on the new collateral) or, terminate the swap with a small breakage fee and a cash return. Since interest rates have risen, the swap contract (with its lower interest rate) has value that will enable the Borrower to receive additional money (cash) on the termination of the swap (hence make even more money on his financing by monetizing the asset value of the swap at termination).

Look for every benefit that you can obtain and monetize. n

Corey Henriksen

Why have some Marketers had bad experiences in the past with interest rate swaps? Bad guesswork and possibly bad advice.

You don’t lock in interest rates for a long time with an interest rate swap if you are going to be in a declining interest rate environment. For example, if we were in Jimmy Carter days where interest rates were 18% and higher, you would not lock in interest rates for a long time because of the distinct probability that interest rates would be declining sooner rather than later.

In this example, because interest rates are high and moving down over time, the swap contract is a liability, not an asset.

The cost for terminating the swap contract is prohibitively expensive because of the necessity to terminate the swap contract for the previously higher rate.

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If you’re going to utilize an interest rate swap at any time, the question that you would ask yourself is… are interest rates going to go any lower or are they going to go higher? If interest rates are not going to go lower, but rather go higher; then your swap contract will be an asset and you could make additional money on it. If it’s the opposite, then it’s going to cost you.

Corey Henriksen is Managing Director of Acquisition and Refinance Capital, Inc., a firm founded for the sole purpose of obtaining numerous capital alternatives for wholesale and retail owners and operators in the petroleum industry.

Corey is a member of NACS, SIGMA, CIOMA and WPMA and is a regular speaker on financing for petroleum retailers and wholesalers.

Corey can be reached at 949.481.8500 or www.AcqRefCap.com.

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ADDITIVES ROUNDUP

Additives ROUNDUP

Here are some of the most established and innovative solutions and solution providers serving those who need the range of fuel additives.

New, More Efficient Lubricity Improvers from Afton Chemical Monacidic lubricity improvers have been used in North American fuels successfully since the introduction of ultra-low sulfur diesel (ULSD). In fact, from 2008 – 2013, Afton’s monoacidic lubricity improvers have treated about 1 of every 5 gallons of diesel fuel consumed, accounting for over 450 billion miles of trouble-free driving. One concern with monoacidic lubricity improvers has always been low temperature performance compared to more expensive neutral products. The industry has solved this by diluting monoacids with high levels of solvent.

While improving low temperature performance, this dilution increases treat rates, increases freight costs, and can even lead to higher storage costs with larger tanks needed. Afton has solved this problem with our new, advanced HiTEC®4170 lubricity improver. This unique chemistry offers naturally improved low temperature properties, allowing much more concentrated versions to be offered, even in colder climates. And, it can be paired with Afton’s HiTEC®4546 conductivity improver to deliver both lubricity and conductivity in one efficient package— HiTEC®4170AS lubricity/conductivity improver.

Biobor JF—Diesel and Jet Fuel Biocide and Lubricity Additive

FPPF Additives

Microbial growth is often recognized as the number one cause of engine breakdown and fuel tank contamination.

Since 1965, Biobor JF has eliminated and prevented microbial growth in diesel and jet fuel for refineries, airlines and fleets alike across the globe. During this 50year span, an unrivaled pedigree of approvals and recommendations has been held from many of the largest diesel and turbine engine manufacturers themselves. Biobor JF effectively kills microbial growth in diesel fuel when present, and with consistent use will prevent bacteria and fungi from establishing a foothold. Additionally, Biobor JF adds lubricity to ULSD, exceeding OEM spec and further protecting injection systems and pumps.

When it comes to the quality of fuel you consume, store or deliver, trust Biobor JF. Contact us directly for more information on the complete line of Biobor diesel conditioners, winter products, and detergents and distribution opportunities.

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 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.

www.aftonchemical.com

www.biobor.com

www.fppf.com

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ADDITIVES ROUNDUP

Fuel Quality Services FQS 3500 Premium Diesel Performance Additive FQS 3500 Premium Diesel Performance Additive is specially formulated to improve the quality and performance of ULSD diesel fuel in modern High Pressure Common Rail (HPCR) engines. It is also effective in higher sulfur diesel fuels and older style diesel engines. Performance features: keeps injectors clean at low treat rate of 1:2,000; rapidly cleans-up dirty injectors, including internal deposits at treat rate of 1:1,000; improves fuel economy up to 7%; restores lost power due to dirty injectors; improves fuel lubricity and stability; reduces filter plugging by asphaltenes and fuel contaminants; provides improved corrosion protection to fuel; and, will not adversely affect water separation of fuel. www.fqsinc.com

Howes Meaner Power Kleaner Howes Meaner Power Kleaner is a specially designed warm weather diesel fuel additive that is effective in all diesel and biodiesel blends. Today’s Ultra Low Sulfur Diesel (ULSD) makes treating your fuel in the summer equally as important as treating in the winter. Using a state-ofthe-art, tier 2 detergent package, Meaner Power Kleaner removes existing injector deposits and prevents future build-ups. It

inhibits premature wear by replacing the vital lubricity lacking in ULSD, which is needed for smooth running injectors. By safely eliminating water, Meaner Power Kleaner helps prevent microbial growth and reduces the need for biocides. The result is more power, improved fuel economy and peak engine performance in both older and new High Pressure Common Rail systems. Meaner Power Kleaner is warranty safe because it is 100% petroleum based and contains no harmful alcohols or solvents. Now available in both bottled and bulk formulas, Howes Meaner Power Kleaner is your summer solution. www.howeslube.com

Low Temperatures, High Performance Innospec is a global leader in diesel fuel technology and is a primary manufacturer of cold flow improvers.

WINTERFLOW™, our next generation of cold flow improvers (CFI), offers an economic and high quality method to improve the low temperature performance of fuels. WINTERFLOW™ is more than a typical CFI and is designed to deliver extended performance by suspending and dispersing wax to help get you through prolonged cold snaps.

The low temperature performance of middle distillates can be specified by Pour Point, the lowest temperature at which fuel will flow, and Cold Filter Plugging Point (CFPP), an indication of vehicle low temperature operability.

WINTERFLOW™ Pour Point depressants modify paraffin crystals’ growth as they precipitate, which means that fuels can be cooled to lower temperatures before they gel. WINTERFLOW™ CFPP additives ensure the production of smaller crystals in middle distillates which leads to a much lower tendency to block fuel lines and filters. www.innospecinc.com

MCC’s SCC-Preventing Ethanol-Soluble Additive Mechanically, the corrosion-related failures at stress-loaded points in fuel ethanol supply chain have been found to be different from the usual delaminating mechanism. At points of high or variable stress, significant sub-surface crack propagation has been identified and is uncharacteristic of typical pitting and flaking with corroded surfaces. This failure phenomenon is called stress corrosion cracking (SCC) as recognized and documented in API report 939D. MidContinental Chemical Company, Inc. has pioneered chemical additive technology for the SCC-free transferring, handling and storage of fuel ethanol.

MCC offers the SCC-preventing ethanolsoluble additive as a solution engineered for the specific application in mind. This includes, but is not limited to, fuel ethanol storage tanks, blending vessels, pipelines and rack piping of any given dimensions. This proprietary technology protects metal surfaces under high stress, variable stress or low stress scenarios. MCC’s additive solution has shown to stop crack propagation from further growth. www.mcchemical.com

Schaeffer’s CarbonTreat™ Premium All Season Fuel Additive Extreme pressures and temperatures in today’s modern fuel injection systems are resulting in some all too familiar problems: plugged fuel filters and fouled injectors. Schaeffer’s

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ADDITIVES ROUNDUP Diesel Guard™ Supreme Common Rail Detergent (CRD)

CarbonTreat™ Premium Fuel Additive Line is the only family of premium fuel additives specifically designed for High-Pressure Common Rail systems (HPCR), particularly when compared to other products that offer similar technology but without a complete premium package. Scheffer’s CarbonTreat™ Premium Fuel Additives are multifunctional ULSD-compliant diesel fuel additives that are highly effective at combating sludge and plugging issues that can impair engine performance. They are also formulated to improve fuel economy, reduce exhaust emissions and increase horsepower. Scheffer’s CarbonTreat™ Premium Fuel Additive Line is available in summer, winter and all-season formulations, and can be used in any diesel-powered vehicle and in all types of diesel fuel, including low-sulfur diesel fuel and biodiesel blends.

New HPCR electronic injection engines develop different problems than older mechanical injection engines due to extreme pressure (30,000 psi) and high temperatures (+400°F) that occur in the injectors. These cause the fuel to break down (coke) and create “asphaltene” like material (deposits).

These deposits cause the injectors to “stick” and prematurely plug fuel filters. Diesel Guard™ Supreme CRD is specially formulated to prevent and clean-up internal injector deposits and prematurely plugged fuel filters in high-pressure common rail and mechanical engines. It also contains extra VT-101 lubricity improver. It works by improving the thermal stability of the ULSD fuel. Diesel Guard™ Supreme CRD: Improves fuel thermal stability; cleansup/prevents “asphaltene” like material; cleans-up existing injector deposits; keeps fuel filters cleaner; lubricates injectors and fuel pumps; prevents “sticky” injectors; restores lost power and fuel economy; meets/exceeds DW10 and XUD9 performance.

www.schaefferoil.com/carbontreat

www.valvtect.com

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INDUSTRY NEWS Verifone Enhances Mobile Suite With Android-based Cloud POS Solution

Verifone announced on March 30 that it is launching a new cloud point-of-sale solution for small-and-medium-sized businesses (SMBs). The Android-based solution, Verifone Cloud POS, will be distributed through Verifone’s network of ISO and acquirer partners.

Merchants across the globe are focused on driving store visits, flexibly managing their businesses and creating secure, high value experiences for their customers. In particular, SMB merchants are seeking more value from their POS in order to accomplish these goals. They want a secure technology platform that is easily customizable, can grow with their business by better enabling digital offers, and identify, engage and reward their best customers through loyalty and coupon programs.

OPW Engineered Systems Bolsters Its Leading Terminal Solutions

OPW Engineered Systems, part of OPW’s Fluid segment within Dover Corporation, has officially announced the inclusion of Liquip’s terminal products to its existing line of world-class fluid handling solutions. OPW Engineered Systems has been in the process of selecting which of Liquip’s products to include since the acquisition of Liquip was finalized in 2014. Beginning April 2015, the newly added Liquip products will be available for purchase at select OPW distributors.

Key Liquip products available for purchase will include: Counterbalance Mechanism—VNB-I4-MK2, LBM800; API Couplers—API 700 Series, API 800 Series; and Swivel Joints—VNC-A4G, VNI-A4VG.

Comdata Joins QuikTrip to Extend Reach of Fuel Discount Network

Comdata Inc., a leader in payment innovation, is has announced its agreement with QuikTrip Corporation to expand the reach of fuel discounts through the Comdata Fuel Consortium network. Developed by Comdata in 2008, the CFC is a nationwide network of approximately 30,000 retail fuel locations offering an automatic price-per-gallon discount to Comdata MasterCard® Corporate Fleet Card customers.

QuikTrip is one of the nation’s premier convenience and gasoline retailers. A privately held company headquartered in Tulsa, Oklahoma, QuikTrip has grown to more than 700 stores in 11 states since its founding in 1958. Through the CFC network, QuikTrip offers all Comdata MasterCard Corporate Fleet Card customers a discount of three cents per gallon on all gasoline and diesel purchases.

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INDUSTRY NEWS

inOvationTV™ Media Platform Now Offered Free to All Fuel Retailers

Wayne Fueling Systems, a global provider of fuel dispensing, payment, automation and control technologies for retail and commercial fuel stations, has announced the availability of the next evolution of its cloud-based technologies with the Wayne Fusion™ site automation system. This updated system features a new hardware design with increased performance.

The Fusion site automation system’s technology enhancements offer the complete control that fuel retailers need to manage all their forecourt devices. In addition, Fusion provides access to advanced off-site services such as loyalty programs, mobile payment and remote management through Wayne Cloud Solutions. Fusion and Wayne Cloud Solutions utilize industry standard interfaces and are designed to work with any point of sale system as well as multiple payment networks and/or loyalty hosts.

“To be honored as ‘best in the US’ by the nation’s fuel marketers and jobbers is indeed a high honor,” said Chris Santy, President, Patriot Capital Corporation. “We appreciate the PMAA members’ recognition of our partnership and our commitment to providing hassle-free financing solutions to the retail and commercial petroleum industry. We look forward to continue helping America’s entrepreneurs to succeed.”

NCR Unveils a New “Grab and Go” Self-Checkout Solution

NCR Corporation, a global leader in consumer transaction technologies, announced today the availability of the NCR SelfServ 90, the latest addition to the family of NCR FastLane SelfServ checkout solutions. It can be used as a free-standing self-checkout kiosk, installed on a countertop or even mounted on a wall.

Patriot Capital Corporation Voted Best in the US for Equipment Financing

Atlanta-based Patriot Capital Corporation announced on January 14 that the Petroleum Marketers Association of America had selected it as the nation’s best equipment financing company.

The “Best in the US” honor for Patriot Capital was bestowed

by PMAA on behalf of the 8,000 member companies in the petroleum marketing and convenience store industry that comprise its membership.

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“Because Patriot has such a great reputation in the industry, I am not at all surprised they were voted the best in the US,” stated Dan Gilligan, President, PMAA, in describing the award.

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The NCR SelfServ 90 is ideal for high-volume stores with many shoppers checking out small baskets and using credit or debit cards. It offers retailers a new cost-effective solution without the added expense of cash or coin tender options, or a produce and security scale. The key purpose is to reduce queues during peak hours for customers purchasing just a few items, such as during the lunchtime rush when customers come in to purchase lunch items or a snack.

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Our Advertisers Company Advanced Fuel Solutions Afton Chemical Airtab American Coalition for Ethanol Amerigreen Ascentium Capital BioBor Fuel Additives Blue Sky DEF Blue1USA Bottom Line Connect Energy Conference Dennis K. Burke, Inc. DM2 FPPF Chemical Company Fuel Ethanol Workshop & Expo Fuel Marketer News Fuel Resource Group Gorman-Rupp Howes HP Energy Innospec Fuel Specialties

Page

Company

39 19 69 54 41 Inside Back Cover 25 7 73 63 67 61 37 53 88 65 50 5 49 58 33

Integer 75 Lock America, Inc. 76 Meridian Manufacturing 55 Midcontinental Chemical Company, Inc. 70 National Advanced Biofuels Conference & Expo 87 Pacific Oil Conference 79 Paragon Solutions 43 Patriot Capital Inside Front Cover Piusi 14 RDM 81 RINAlliance 89 Schaeffer 45 Scully 47 Simmons 31 SMARTLogix Back Cover Steel Tank Institute 28 Sunshine Food, Fuel & Beverage Expo 77 Trinium Technologies 23 Valvtect Diesel Guard 9 Verifone 16

Test Your FMN Acumen

What Does That Mean

The list below represents acronyms used in this issue of Fuel Marketer News.

API AST ASTM ATEX ATG BBL BIS BLE BLM BTU CAFE CFI CFM CFPP CFR COPS CPG CRM CVM DEF DOE EAR ECAR EMV EPA

American Petroleum Institute Aboveground Storage Tank (formerly known as) American Society for Testing and Materials ATmospheres EXplosibles (French: Explosive Atmospheres) Automatic Tank Gauge Barrel of Oil Bureau of Industry and Security Bluetooth LE Bureau of Land Management British Thermal Unit Corporate Average Fuel Economy Cold Flow Improvers Continuous Fuel Monitoring Cold Filter Plugging Point Code of Federal Regulations Cross-Over Prevention System Cents Per Gallon Customer Relationship Management Cardholder Verification Method Diesel Exhaust Fluid US Department of Energy Export Administration Regulations Environmental Compliance for Automotive Recyclers Europay MasterCard VISA Environmental Protection Agency

EPCA FRF GPS HPCR iOS ISO

Energy Policy and Conservation Act of 1975 Fuel Relief Fund Global Positioning System High Pressure Common Rail Apple Smart Device Operating System International Organization for Standardization Information Technology thousand barrels per day; also kb/d Kilowatt Keystone XL Pipeline Liquified Refinery Gases

IT kbpd kW KXL LRG Mb, Mbbl or MMbbl Millions of Barrels of Oil MLB Major League Baseball MTBE Methyl Tertiary Butyl Ether (gasoline additive) NBB National Biodiesel Board NFC Near Field Communication NGL Natural Gas Liquids NGO Non-Governmental Organization NOx Nitrogen Oxide OAPEC Organization of the Arab Petroleum Exporting Countries OEM Original Equipment Manufacturer OPEC Organization of the Petroleum Exporting Countries

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OSHA PADD PCI PDF PETA PIN POS Psi RFID RFS ROI SCC SCR SDK SPR TA TUV UL ULSD UST VNET WTI XML

?

Occupational Safety and Health Administration Petroleum Administration for Defense District, US Department of Energy Payment Card Industry Portable Document Format People for the Ethical Treatment of Animals Personal Identification Number Point of Sale Pounds per square inch Radio Frequency Identification Renewable Fuel Standards Return on Investment Stress Corrosion Cracking Selective Catalytic Reduction Software Development Kit Strategic Petroleum Reserve TravelCenters of America Technischer Überwachungsverein (German: Technical Monitoring Association) Underwriter’s Laboratory Ultra-Low Sulfur Diesel Underground Storage Tank VeriFone Digital Network West Texas Intermediate Extensible Markup Language