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Spring 2013

Serving Ohio’s petroleum and convenience industry

Discover Hidden

Energy Efficiencies

Communicating

Your Green Message

Driving the Leaders of Tomorrow


In existence since 1922, a renewed OPMCA is moving forward. Together with its members, the OPMCA is driving Ohio forward. CHAIRMAN Mark Lyden, truenorth, Brecksville VICE CHAIRMAN Patrick Gilligan, Gilligan Oil Company, Cincinnati

PMAA DIRECTOR Ben Englefield, Englefield Oil Company, Heath PRESIDENT & CEO Jennifer B. Rhoads, Esq. jrhoads@opmca.org VICE PRESIDENT David A. Biemel, Esq. dbiemel@opmca.org DIRECTOR OF EVENT MANAGEMENT Shane Schaefer sschaefer@opmca.org DIRECTOR OF MARKETING & COMMUNICATIONS Stephanie Aubill saubill@opmca.org ADVERTISING SALES REPRESENTATIVE advertise@opmca.org 17 S. High Street, Suite 810, Columbus, OH 43215 614-947-8646 (phone) 614-947-8648 (fax) www.opmca.org FOLLOW US ONLINE! facebook.com/DriveOhioForward twitter.com/OPMCA linkedin.com/company/opmca

Spring 2013

DIRECTORS Keith Cheney, Certified Oil Company, Columbus Doug Hartley, The Hartley Company, Cambridge Barry Henderson, Ports Petroleum Company, Wooster Bob Holder, R.D. Holder Oil Co., Inc., Springfield Nancy Kister, O & P Oil & Gas, Andover Denny Knott, Ney Oil Company, Ney Sandra Morgenstern, Par Mar Stores, Marietta Zach Santmyer, Santmyer Oil Company, Inc., Wooster Thomas Stephenson, Stephenson Oil Company, Hamilton Mike Stipp, District Petroleum Products Inc., Huron Bob Thompson, Town & Country Co-Op, Inc., Ashland Kim Ullman, Ullman Oil Inc., Chagrin Falls

TABLE OF CONTENTS

The Ohio Petroleum Marketers and Convenience Store Association (OPMCA) is the statewide trade association representing more than 500 independent, small businesses in the petroleum and convenience industry. OPMCA’s members own and operate the overwhelming majority of Ohio’s 5,200 convenience stores and employ more than 55,000 Ohioans. Members on the wholesale side of the industry employ thousands more in commercial fueling facilities, transportation divisions, heating oil sales, and home offices.

Features

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Communicating Your Green Message Driving the Leaders of Tomorrow Perspective on Propane Autogas Discover Hidden Energy Efficiencies

Extras

Fueling Success Annual Meeting/Legislative Reception Future of Fuels Insight UST Fund Board Update Smokeless Tobacco Employers Scrambling to Keep Up

Departments 3

Fuel for Thought

30 Capitol Blend 36 Founders’ Circle Spring 2013

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Some see a BP station. We see a powerful retail network. BP Branded Marketers are part of a powerful retail network committed to driving traffic and volume growth, building consumer loyalty, increasing revenue and reducing operating costs. Thanks to the strong BP brand, our differentiated, quality fuel slate and superior marketing programs, our Branded Marketers can be sure their site will stand out from the competition. To learn more about becoming a BP Branded Marketer, contact your local Jobber Sales Manager: Jim Laubacher | (513) 574-0867 | james.laubacher@bp.com

Š2013 BP Products North America Inc.


Time Starts on Opening Day Measure everything that matters. Billy Beane’s shown that by measuring statistics, he could field a competitive team for less money than the teams relying on gut instincts alone. Great leaders use all the data and analysis they can get to make smart, informed decisions. by Jennifer Breech Rhoads, Esq. President and CEO To baseball fans, Opening Day is synonymous with spring. It’s a fresh start for 30 major league teams and millions of fans like me. It’s a fresh start for you. Whether you’re a CEO, entrepreneur, or entry level employee, bestselling author Dave Kerpen says to become a better leader simply apply baseball’s most important lessons: You can’t hit a home run unless you swing for the fences. You can’t accomplish huge things unless you go for it. In baseball, with two strikes, you choke up, and try to make contact. In business, there’s a time to settle for less. But, always start by thinking big. Don’t be afraid to get your uniforms dirty. Leaders live by example. That means they can get “in the weeds” and handle basic, menial tasks when necessary. If I have to take the garbage out sometimes, that’s

It’s more about team than superstar. In baseball, more than in any other team sport, individuals make less of a difference than the whole team. A dominant pitcher only plays once every five days. Great leaders recognize the whole is greater than the sum of its parts. It’s great to have top talent. But, it’s the whole group that must perform to succeed. Don’t go down looking. It’s important as a hitter to be patient. Wait for your pitch. But, with two strikes, you’ve got to swing the bat. Great leaders have strong convictions, and they don’t go down without a fight for what they believe in most. Keep your eye on the ball. Hitting a major league pitch is one of the most difficult tasks in sports. To succeed, players focus on a ball coming at them at 80100 miles/hour. In business, it’s essential to stay focused. Great leaders know what their top priorities are for the day, month, quarter, and year. The best leaders focus on a 3-5 year plan.

Hit’em where they ain’t. It doesn’t matter how hard you hit the ball. Just hit it where the opponents aren’t to get a hit. Great entrepreneurs realize that as long as they find a market need, and solve a problem, they’ll succeed. Be ready for a curve ball or changeup. You can be a great fastball hitter. Unless you can hit a curveball and changeup, it won’t matter. Great leaders are responsive and adaptable. To succeed, you have to ready their group for anything and everything. Key players can knock a fastball out of the park, but are also prepared for the unexpected.

FUEL FOR THOUGHT

okay. Sometimes getting your uniform dirty inspires others to work that much harder.

Talent wins games. Chemistry wins championships. You can have the best players and the smartest, most strategic coaches. If the players don’t get along well, they won’t win a championship. Peter Drucker says, “Culture eats strategy for breakfast.” The best leaders know a team that believes is far more important than any vision or strategy. Play Ball.

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Coming Soon Summer Issue

“Focus on Retail” • M-PACT 2013 Highlights • Foodservice Strategies • Latest in Loyalty • HR at the C-Store Level

To Contribute an Article: Stephanie Aubill Director of Marketing and Communications saubill@opmca.org 614.947.8646 x4 To Advertise: Ad Sales Representative advertise@opmca.org 614.947.8646 x8

Slow Pumps Slow Flow Clogged Filters Clogged filters lead to customer complaints. You’ve heard them and you have certainly lost business to your competition as a result. Changing filters is not a long term fix, if slow flow is your problem you already have contaminated fuel tanks.

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Refuel can help you determine the condition of your tank.

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Driving Ohio Forward on Capitol Hill including expanded use of ethanol blends, menu-labeling requirements implemented as part of the Affordable Care Act and the impact of swipe fees on our industry. Many members of Congress were surprised at the wide range of issues facing our industry and pledged to assist us whenever possible. It was clear that they and their staffs recognized the important role that our industry plays in Ohio’s economy as well as our need for regulatory and statutory consistency, which allows for economic growth. The grass roots efforts by OPMCA members are critical to our advocacy efforts. Be sure to watch for information about this year’s Driving Ohio Forward: Legislative Listen & Learn Tour—your involvement makes a difference!

FUELING SUCCESS

In March, OPMCA President and CEO Jennifer Rhoads and Vice President David Biemel along with OPMCA members Mark Lyden, truenorth, Tony Kenney, Speedway LLC and Steve

Hightower, Hightowers Petroleum Company, joined industry advocates in Washington for NACS’ Day on Capitol Hill—a two-day event where retailers, state associations and industry suppliers meet with members of Congress and their staff to educate them about the issues important to the petroleum and convenience industry. The event included national meetings and panel discussions on the importance of industry advocacy and building relationships. Most importantly, the trip included face-to-face meetings with Ohio’s congressional delegation, providing an ideal opportunity for OPMCA to share how the issues they vote on affect Ohio’s petroleum and convenience industry. While there are many issues facing petroleum wholesalers and retailers, the meetings focused on specific issues,

Petroleum Contractors Annual Meeting The Ohio Petroleum Contractors Association (OPCA) held its Annual Meeting on February 26, 2013. Ohio’s petroleum equipment industry listened to comprehensive presentations by Battelle Memorial Institute’s Anne Marie Gregg on the most recent developments about issues involving equipment used to store and dispense ultra low sulfur diesel (ULSD). Attendees also heard from the Division of Air Pollution Control’s Bob

Hodanbosi on the state of Stage II vapor recovery and Vorys, Sater, Seymour & Pease’s Tony Ehler on how comprehensive tax reform could impact Ohio’s petroleum contractors. Additionally, OPCA members elected directors to serve on the association’s Board. Members elected Keith Blankenship, Mid Valley Supply, Kentucky, and Patrick Jameson, JGD Associates, to each serve a three-year term. Spring 2013

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ANNUAL MEETING

Fueling Better Business Annual Meeting Highlights Ohio’s petroleum and convenience industry gathered at the Capitol Club on February 26, 2013 for this year’s OPMCA Annual Meeting. Marketers and retailers in attendance learned the latest on E15 to make better business decisions from the American Petroleum Institute, BP, Marathon, and representatives from the national auto manufacturers. Attendees also heard from the Ohio Department of Insurance and Business Administrators & Consultants providing business strategies to navigate the twists and turns of healthcare reform in Ohio.

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3. (1) OPMCA leadership doesn’t miss a chance to talk business at the meeting (2) Greg Erhlich receives an award from OPMCA President Jennifer Rhoads on behalf of the association in honor of his service on the Board of Directors. (3) Attendees discover best strategies for their business concerning healthcare reform in Ohio. (4) OPMCA members learn about E15 and how it will impact their businesses.

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2013 Election Results

During this year’s Annual Meeting members elected Keith Cheney, Certified Oil Company, Columbus, and Bob Holder, R.D. Holder Oil Co., Inc., Springfield, each serving their first three-year terms.

Keith Cheney Certified Oil Company, Columbus Keith Cheney is chief operating officer of Certified Oil Company, headquartered in Columbus. Founded in 1939, Certified Oil is an independent operator of convenience stores and retail fueling facilities that operates or supplies over 140 locations in Ohio, West Virginia, and Kentucky.

Bob Holder H.D. Holder Oil Company, Springfield Bob Holder is president of R.D. Holder Oil Company, headquartered in Springfield. Founded in 1986, Holder Oil is a distributor of BP, Castrol and Gulf products in Ohio and Northern Kentucky.

ELECTION RESULTS

The OPMCA Board of Directors develops the strategic direction of the association, and is currently comprised of fourteen OPMCA member directors. Twelve directors must be elected by the association’s Active members at the annual membership meeting.

MAKE THE CHANGE TO SUNOCO...

THE WINNING TEAM! Join the Company that has steadily increased its retail presence by nearly 60% over the past decade. Make the change to Sunoco! Joe Bolash New Business Development Manager (440) 213-0928 Email: jjbolash@sunocoinc.com

The Proof is in the Performance! • Founded in 1886, Sunoco is one of the largest American-owned and operated independent marketers in the country • Over 125 years of providing high quality fuels • Official Fuel of NASCAR® and IndyCar Racing Series

• A network of pipelines and terminals ensures product is available when and where you need it • Excellent sales support and marketing initiatives

Tom Pliske Distributor Area Manager (330) 304-4709 Email: tbpliske@sunocoinc.com Preston (Bud) Talbot (800) 777-6444 ext 1452 Email: Pjtalbot@sunocoinc.com

• Strong consumer and commercial card marketing programs

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LEGISLATIVE RECEPTION

OPMCA Members Make Their Voices Heard On Capitol Square More than 75 OPMCA marketers and retailers personally took their message to Capitol Square and to the Ohio General Assembly in late February for the OPMCA Legislative Reception. Don’t miss the opportunity to make your voice heard during this summer’s Driving Ohio Forward: Legislative Listen & Learn Tour. Contact David Biemel at 614.947.8646 x3 or at dbiemel@opmca.org.

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7. (5) Bob Thompson (Town & Country Co-Op, Ashland) and Steve Hightower (Hightowers Petroleum, Middletown) make their point with Sen. Eric Kearney. (6) Matt Howland (Gilligan Oil Company, Cincinnati) explains his business to Rep. Connie Pillich. (7) Jed Wise (Ravenna Oil Company, Ravenna) listens as Rep. Tony DeVitis shares his perspective on tax reform.

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(8) Jim Doersam (Petron Inc.) and OPMCA President Jennifer Rhoads share their insight with Rep. Gary Scherer. Kim Ullman (Ullman Oil Company) educates Sen. Tom Patton about the industry.

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(9) Kim Ullman (Ullman Oil Company) and Jim Doersam (Petron Inc.) discuss important industry issues with Rep. Gary Scherer. (10) Ryan Howard (truenorth) catches up with Rep. Sean O’Brien.

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(11) OPMCA President Jennifer Rhoads educates Rep. Marlene Anielski on important issues affecting OPMCA members. OPMCA partners share with Rep. Tim Brown their insight of the industry.


P R E M I U M

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Specifically designed for 2010+ EPA engines.

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P R E M I U M

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EXTRA CETANE

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EXTRA CETANE

CarbonTreat™ Additive Testing Started at 979 hours Same fuel filter casing after 5 weeks with CarbonTreat™ Fuel filter casing before Premium in the CarbonTreat™ Premium. fuel system.

As shown, after almost 900 hours, this engine is beginning to lose power based on the dyno. After using Schaeffer’s CarbonTreat™, the engine effectively gained 5-10% horsepower.

Prevent Carbon Buildup In the First Place. CarbonTreat is the solution to your sludge and plugging issues with ULSD. TM

ULSD is better for the environment, but costly on an unprotected engine. Carbon buildup creates a sticky sludge that plugs fuel injectors and chokes filters. The remedy used to be ‘Repair and Replace.’ Thanks to Schaeffer’s new CarbonTreat™ Premium diesel additive, the cure is prevention. Adding CarbonTreat™ shows your customers that you’re on their team. You can provide them with a solution that will reduce their downtime and overhead. With regular use of CarbonTreat™, your customers will clean up their existing problem and prevent it from happening in the future. You can see the Phil Hamilton results. Find out more ager National Fuel Additive Man m about CarbonTreat™ online phamilton@schaefferoil.co at www.schaefferoil.com/ Cell: 618-616-0602 carbontreat or call Phil 102 Barton St. Phone: 314-865-4100 St. Louis, MO 63104 Hamilton to arrange an appointment.

www.schaefferpremiumdiesel.com • 102 Barton Street, St. Louis, MO 63104 • 1-800-325-9962 Spring 2013

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GREEN MESSAGE

Communicating Your Green Message

You can gain great public relations benefits by explaining your environmental policy to customers and staff; suppliers; local, state and federal governments; NGOs and your local community. Marks & Spencer has pioneered the move to widen communication of sustainability to include what is perhaps the most important company stakeholder—the customer. Its “Plan A” (because there is no “Plan B”) campaign is a marketing tool that incorporates openness to customers and clear facts and figures for stakeholders. Good communication requires careful planning and implementation. A well-thoughtout communication plan: • Identifies key audiences • Determines the information each audience needs 10

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• Adapts the message to audience needs and expectations

Customers and the Media

Grocery retailers have embraced a range of customer-focused initiatives. The following are typical successful programs. Recycling Europe currently recycles or composts 27 percent of its waste. By comparison, the EPA estimates that the recycling rate in the United States was around 32 percent in 2006. Retailers are recycling an increasing proportion of storegenerated waste, including paper, cardboard, oils and fats, pharmaceuticals, confidential paper, electronic goods, hazardous materials and plastics. Typical recycling efforts

that involve customers include the following: • Installing recycling bins for consumer use. • Rewarding customers with “green points” for participating in a store’s recycling program. • Offering a small monetary incentive for returning recyclable bottles. Zarco 66 places recycling bins next to its trash containers and finds that they are popular with customers. When Tesco introduced recycling machines that automatically sort and compact glass, metal and plastic, it doubled the amount of waste recycled. Reusable Bags In Europe, grocery bags are at the top of the grocery industry’s green agenda and in some cases, the government’s.


aligned with your core strategy and brand values. This is a particularly important area for companies that want to replace the idea of convenience stores as “selling gas and creating trash,” with more positive images.

• Offering to donate funds to charity for each plastic bag customers decline.

• What are you trying to achieve as a business by telling your environmental story?

• Rewarding customers choosing reusable bags with loyalty card points.

• What have you already done?

• Promoting reusable bags at points of purchase. • Promoting reusable bags in advertisements and sales flyers. • Giving away reusable bags for a limited time to generate interest. Local Products Offering locally grown or produced products is an important new area for convenience retailers. As transportation costs rise, more retailers are promoting local purchases with shelf labels stating how many miles products have travelled to the store. Zarco 66 markets biofuels as locally grown. A representative said: “Sitting where we are in the center of the United States, we’re watching fuel prices go up and moving our money out of our area. The only way to keep that money local is to offer a locally produced energy source.” You can drive traffic and loyalty to your business if you communicate your green efforts in an authentic, simple and transparent manner that is

Before deciding how to let your customers know what you are doing, examine your aims and achievements by asking these questions:

• What do you still need to do? • What is the competition doing? • What do your customers already know about the issues? • What is important to your customers? Retailers use a variety of approaches to inform customers about their environmental projects. Most display information boards prominently in the store. They also include information about biofuels on their fuel dispenser screens. Some companies place messages or interactive energy calculators on their Web sites. Other techniques include installing wind turbines or solar cells in areas visible to customers.

happens when consumers feel that a company’s messages about its environmental practices, products and services are misleading. A classic example of greenwashing is when hotels ask guests to reuse towels in the interests of the environment, when it is clear that the priority is reducing laundry costs. Likewise, customers will react negatively to businesses that try to establish environmental credentials with only a few token gestures. Stores should be sensitive to practices that undercut their green message. Customers are quick to point out the irony in promoting a green message while allowing wasteful practices such as running televisions all day. The following steps can help you avoid greenwashing your message:

GREEN MESSAGE

Ireland’s government imposed a 15-cent levy on disposable plastic bags in 2002, and use fell from 328 to 21 bags per customer annually. Retailers can realize huge cost savings when they stop providing free bags and have reported no adverse effects on sales after implementing bag reduction initiatives. Typical retailer programs to encourage reusable bags include the following:

• Don’t say that you have “gone green.” If your green program is a work in progress, say so, and give customers updates. • Invite customers to provide input and ideas for your green program. • Do a visual audit of your store. See it the way a customer would. Are you talking green

A representative from Green Valley Grocery said: “The awning is covered in solar cells, so customers get a subtle reminder that Green Valley is going green. We’re trying to make it not all behind the scenes. We want everyone to know.” You must take care when creating your green message to avoid “greenwashing.” That Spring 2013

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but wasting energy? Have you set up recycling stations?

GREEN MESSAGE

Environmental programs and projects can generate good (and free) publicity. To attract media coverage of your green news: • Maintain transparency: Give clear messages about what you’ve done and what you still need to do. • Provide context: Describe benefits to your business and community. • Do your homework: Prepare press kits with facts and figures. • Offer exclusives: Talk to one media source. • Be accessible: Invite journalists to company tours. • Get recognition: Enter contests or programs that recognize your efforts and get the results published.

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Another excellent tool for attracting media coverage is special events. To get the most mileage from your special event, follow these tips:

• Send press releases and invite media to attend.

• Create a planning group to think through and manage event logistics such as parking, trash management, comfort stations, and so on.

• Encourage employees to participate.

• Tie your event to an environmental occasion such as Earth Day. • Collaborate with other organizations that can help promote your event and widen its appeal. • Invite your customers and give them a chance to get involved by volunteering. • Involve children. Have special activities geared to children, which will encourage parents to attend.

• Choose a location that’s easy to find and will accommodate your activities.

• Make it fun. Choose a strong theme and make sure it is an event you would want to attend. • Provide giveaways. Make sure they are environmentally themed, such as reusable grocery bags. • Avoid sales pitches. You want people to relate the event to your company, but don’t use it to drive sales. • Thank everyone who helped put on your event. Reprinted from the 2013 NACS Green Toolkit


Lykins Companies...

Lykins is a premier supplier of traditional and environmentally friendly altenative fuels for all businesses, government fleets, municipalities, homes and farms. Lykins has been a dependable supplier since 1948 providing customer service and quality fuel solutions. Retail Opportunities Lykins Oil Company supplies major oil petroleum products and branded franchises such as BP, Clark, Exxon, Marathon, and Shell to various independently owned retail outlets including service stations, conveniences stores, marinas, sub-jobbers, etc... in Indiana, Kentucky and Ohio. We specialize in working with investors on developing and building new, ground-up branded gasoline facilities in return for a supply contract.

Commercial and Wholesale Lykins Oil Company Commercial and Wholesale Division provides commercial fuel sales, delivery and equipment solutions for customers purchasing quality gasoline, diesel fuels and environmentally friendly fuels for use in fleets, construction sites and farms. Lykins provides quality service and products 24/7 with the right price and the right program to fulfill your petroleum oil needs. Whether you have a 20,000 gallon or a 200 gallon tank, we deliver!

Residential and Business Heating Our Residential and Business Heating Products Division provides the most efficient and cost conscious approach to heat a home or business with heating oil or propane. With our automatic fuel programs you will never be without heat and our friendly payment programs make it easy on your pocketbook.

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Lykins Companies, Inc. 5163 Wolfpen Pleasant Hill Rd Milford, OH 45150


LEADERS OF TOMORROW

Driving the Leaders of Tomorrow Do You Have a Succession Plan?

For the next 19 years, 10,000 American baby boomers will turn 65 every day. Many of them are family business leaders who are thinking about transitioning leadership to the next generation. While it is great to start considering the transition to the next generation—sometimes we find ‘action-oriented’ entrepreneurs jump to make changes before they have fully thought through the big picture. We are not advocating delay—just planning and communication.

Too often forward-looking leaders jump into action by developing next generation leaders, creating new reporting structures, revisiting estate plans, and establishing new governance structures. All of which are important. However, sometimes leaders find themselves in active pursuit of a destination that is not only unclear to them, but is interpreted differently by multiple stakeholders in the process. So before you put the car in drive, be sure to communicate with your passengers and gain alignment on some important

questions: What is our ultimate destination? Which roads will get us there while meeting our objectives along the way? If we need to take a detour, what are the best alternatives? What is our arrival date? How will we know we’re there? A desired outcome, or vision, for what future leadership looks like helps ensure alignment and creates the collective energy you need for a very important journey.
 By Kelly LeCouvie, The Family Business Consulting Group, LLC.

What You Need to Know for Your Family Business

Steve Anderson’s Secrets to Successful Succession Planning Steve Anderson is a leading consultant and president of Integrated Leadership Systems, LLC, a Columbus-based company that offers leadership development through executive coaching, organizational development, consulting and workshops. He was a third generation member of the family-owned business, The Andersons, Inc. based in Maumee,

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Ohio. With ten years of family business consulting and extensive knowledge of leadership development, Anderson has provided consulting services for dozens of nationally recognized companies. Why should family businesses have a succession plan? A succession plan insures that the next generation is prepared

when the present generation is ready to retire. The transfer of leadership is a huge step for a business, and it’s important the company doesn’t experience a disruption of growth when this happens. A well-thought out plan means the younger employees have the security of knowing the company will be there long after the current leadership retires.


What is the biggest mistake you see in succession planning? The biggest mistake I see in family businesses is that they make the next generation feel obligated to join the business. This sets up a situation where family members may stay with the company out of guilt, not because they want to work there. There’s also a feeling that if you left it was because you could not deal with the pressure. In essence you were a failure.

How important is training for the success of the family business? Companies make a big mistake by not preparing the next generation of managers to lead. A succession plan identifies potential candidates to succeed the present leadership and assesses their present skills. A plan can then be developed to help them fill in their areas of weakness. Such a plan might include cross training within your company, training, and mentoring/coaching. Handing the baton to the next generation without the proper training makes the future of the company much less certain. Is it difficult to transition from one generation to the next? Many company leaders do not

want to retire. Their sense of self is tied to their job, so they will not go away when it is their time. Even though they transfer power to a younger family member, they become the ‘de facto’ leader of the company because they will not stop overshadowing their heir. Needless to say this causes a great deal of frustration for everyone involved in this process. A leader who is set to retire should have the courage and humility to step aside when it’s their time. This will allow consistent leadership and will eliminate frustration or confusion in the company. What final thoughts do you have for family businesses? As you can imagine there are many challenges in successful succession planning in a family business, but the benefits are clearly worth the effort to the family, the employees and the customers. By taking the time to create a succession plan, the next generation is prepared to lead the company when the present generation leaves. Implementing a well-thought out plan creates a peace of mind that the right people are in the right positions to drive the company forward.

LEADERS OF TOMORROW

Is leadership transfer difficult for family businesses? Succession planning is a critical issue in a family business. But, things can get complicated when discussing leadership transformation from one generation to the next. In fact, only thirty percent of family businesses survive into the second generation, ten percent make it to the third generation, and three percent make it to the fourth generation. This is unfortunate because family businesses have so many wonderful qualities to provide our economy.

members of the next generation as well as the employees of the firm. It is critical that the company doesn’t experience a disruption in service due to inconsistent leadership. Rather than being distracted by the lack of succession planning, the employees stay engaged and are able to better serve customers. When a succession plan is in place, the future of the family business is secure.

Are there other problems you see during leadership transformation? Many business owners fail to create a plan to develop the next generation. This causes a great deal of anxiety in Spring 2013

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PROPANE AUTOGAS

A Fleet’s Perspective on Propane Autogas What are the opportunities for propane to gain wider acceptance as alternative fuel for fleets, and what’s holding it back? If you’ve been in fleet long enough, propane as an alternative fuel has crept into your discussion at various times. You’ve weighed the benefits and drawbacks specific to your fleet needs, and you’ve probably formed a set of opinions on propane, whether you’ve implemented it or not. Is propane autogas poised for a wider fleet play? Tucker Perkins, chief business development officer at the Propane Education & Research Council (PERC), thinks so. “Well of course he’d push that viewpoint,” is what you may be thinking right now, and I thought similar, since I’ve been hearing that propane is poised for growth for years.

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Without prognosticating on propane’s growth potential, my discussion with Perkins overturned a few of my longstanding beliefs on propane, and I gained some new information on the market— especially as compressed natural gas (CNG) is today’s “in” alternative fuel.

A Domestically Produced Fuel

I’ll admit that I thought that because propane is a derivative of crude oil, it is dependent on foreign oil and the price of oil. But propane is also derived from natural gas, and if you’ve picked up a newspaper in the last five years, you know we have a lot of it in the shale fields of North America, along with new methods to extract it. Yes, a decade ago and beyond, the majority of propane autogas was produced from crude oil.

Today, however, about 70% of the propane produced in the U.S. is made from North American natural gas; the remainder is produced from North American crude oil while less than 3% comes from other countries. In fact, the U.S. is a net exporter of propane. Perkins says that propane’s price ratio to crude oil has dropped significantly and—using the futures market as a barometer— is expected to stay much more on par with natural gas.

Availability of OEM Products

ROUSH CleanTech has propane conversions for an array of Ford pickup trucks, vans, cutaways and chassis cabs. General Motors offers a single-source liquid propane (LPG) option for its 2012 GMC Savana cutaway 3500 and 4500 vans. Medium- and heavy-duty truck makers such as


But for propane to gain a wider foothold, more factory-direct models are needed from more manufacturers, which will improve order-to-delivery times, enhance systems integration and ease warranty issues. This is a chicken-and-the-egg scenario, as most manufacturers prefer to work with a factory-approved conversion company for volumes less than 10,000 a year, Perkins says.

More OEM models will also move the market away from the perception that propane is an aftermarket play. “When the OEMs come in with these new liquid-injection systems, it gives everybody a little bit more credibility,” Perkins says, noting that the handful of companies producing aftermarket conversions today use the latest technology that performs perfectly well in fleets. It can be a long road from between a green light for a new technology and implementation; add to that the time it takes for new products to gain sales

momentum after hitting the market. Nonetheless, Perkins believes the manufacturers are getting onboard. “Ford [with Roush] will sell more propane autogas vehicles in the next 12 months than they sold in the previous four to five years combined,” he says.

Wholesale Valuations

At present, used vehicle value guidebooks such as Black Book do not publish values for vehicles powered by propane, or CNG for that matter. The volume isn’t there for Black Book to reasonably interpret the data, and the ones

PROPANE AUTOGAS

Freightliner Custom Chassis and Kenworth have propane options direct from the factory.

A Local Face of Clark It’s happening in so many Ohio markets. Independents like you are turning to Clark to power their future. Why Clark? It’s simply a matter of control. Doug Cash, of Belmont Petroleum - one of your local Clark marketers - emphasizes these key benefits: Doug Cash, Principal Belmont Petroleum

• We control our source of fuel supply - we buy at the lowest price • We know that Clark’s brand image creates strong street appeal • We accept a full slate of cards - no customer is turned away • We enjoy stability - we know that Clark is our brand, our partner

Find out how branding Clark enables you to take control of your margin, your operations and your future. To learn more, call your Clark Representative Bill Troyer at 877-GO-CLARK or via cell phone at 630-258-7339.

Choose the Winning Formula for Independents – Choose Clark Spring 2013

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PROPANE AUTOGAS

that do get remarketed generally aren’t through the auctions, says Ricky Beggs, managing editor of Black Book. Anecdotally, propane vehicles fare well in the used vehicle market, Perkins says, and fleet operators are not afraid to drive those vehicles to the point where resale value is no longer an issue. Black Book will no doubt be onboard when the volumes increase, yet for the meantime, a lack of published wholesale values is a barrier to greater implementation.

Fueling Infrastructure

Perkins says PERC surveys reveal that potential buyers are held back from propane because of a concern about fueling infrastructure. There are more than 2,500 publicly accessible propane fueling sites across the country—substantially more than public CNG stations—and Perkins says a surge is underway to install commercial fast-fill fuel pumps. Still, for many fleets in many areas of the country public fueling is not practical.

But that may be missing the point for how propane works feasibly for fleets today, which is with onsite fueling. Small fleets might balk at the idea of installing their own fuel pump, but consider the case of Lake Michigan Mailers of Kalamazoo, Mich.: The company has only four propane-powered vehicles, yet its propane supplier installed a pump onsite for free with a guaranteed contract. I’ve spoken with other fleets under this type of arrangement. With defined routes and centralized fueling, would propane fleet vehicles even need to fuel opportunistically on the road? In most fleet cases, no, because propane fuel tanks can store enough fuel for close to the range achievable with a normal gasoline tank. And this is where propane starts to differ from CNG.

Propane Properties

I won’t get into the finer points of comparing propane autogas emissions to CNG. Both are cleanburning fuels, though propane has an edge when comparing greenhouse gas emissions.

But when looking at propane’s properties, at 104% octane and more than twice the BTUs of CNG, propane autogas offers greater driving range than CNG and performance on par with diesel. (Car rental shuttle operators take note.) Further, propane is stored as a liquid and at a much lower pressure than CNG, which allows for a lighter (and lowerpriced) fuel tank. It also means lower infrastructure costs. “We conservatively say you can install 15 propane fuel pumps for the cost of one natural gas pump,” Perkins says. Perkins maintains that propane autogas is not only the cheapest alternative fuel infrastructure available, but is the cheapest infrastructure available even compared to diesel and gasoline. “The economics dwarf most any other choice,” he says. So my thinking on propane has been adjusted, but I just write about fleets. Fleet managers, have your viewpoints changed recently to a point where you would implement propane? Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News for Bobit Business Media. Reprinted with permission from BusinessFleet.com

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FUELS INSIGHT

Future of Fuels Insight The number of registered vehicles in the United States will increase 26.7%, the number of vehicle miles traveled will increase 40% and the amount of energy consumed by the transportation sector will increase by only 1.8%. Liquid fuels (consisting of gasoline, diesel fuel and E85) will remain the dominant energy source for transportation, losing only 0.46% market share to 99.14% in 2040.

Gasoline consumption will drop 18.4% while diesel fuel will grow 27.4% and E85 will expand 1000%, but still contribute only 0.11 million barrels per day. The combination of new Corporate Average Fuel Economy standards and the Renewable Fuels Standard will require an average of 28.1% renewable fuel content in every gallon of gasoline in 2022 in order to comply with the two regulations.

The market share dominated by gasoline-powered vehicles will drop nearly 5% to 88.2%; market share will increase for diesel-powered and flexible fuel (E85) vehicles, reaching 3.8% and 8.0%, respectively. Non-liquid fuel alternatives (propane, natural gas, electricity and hydrogen) will increase market share 115%, but still only contribute 0.86% of transportation energy. NACS 2013 Future of Fuels Report

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Spring 2013

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ENERGY EFFICIENCIES

Energy Efficiencies Discover Hidden

M A N AG I N G YO U R E N E R GY CO STS A typical convenience store in the U.S. uses an average of 52.5 kilowatt-hours (kWh) of electricity per square foot and 38.2 cubic feet of natural gas per square foot per year. However, energy intensity can be greatly amplified by a variety of factors, including the quantity and types of hot food you’re selling, the amount of refrigerated space in the store, and the levels of interior and exterior lighting (for example, if your store also has a gas station with a lighted canopy). Factoring in these elements means that your monthly electricity usage may be anywhere from 15,000 kWh/month to 50,000 kWh/ month. Although there are many differences among convenience stores, there are many similarities in how they use energy.

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In general, refrigeration and lighting collectively account for more than 75 percent of total electricity use in an average grocery or convenience store (Figure 1). Looking at energy consumption across all types of fuels (including electricity, natural gas, and heating oil) provides a more complete picture about where energy is being used and where it can be cost-effectively managed to reduce waste and decrease costs (Figure 2). Although energy expenditures represent a relatively small fraction of a convenience store’s total operational costs, improving efficiency and reducing energy costs can increase its profits by as much as 10 percent. We found a

variety of measures—ranging from those that promise a quick payback to longerterm investment options—that can help you better manage your store’s energy costs and save you money.

Quick fixes

Convenience stores can benefit from many easy, low- or nocost fixes that can add up to significant energy savings— assuming average electricity costs of 10 cents/kWh, every 1,000 kWh you save equals $100 off your utility bill. REFRIGERATION Check temperature settings in refrigerators and freezers. Temperatures that drift below recommended levels can be wasting energy and costing you


ENERGY EFFICIENCIES

Ventilation 3% Ventilation Space heating 3% 3% Space heating Other 3% 5% Other 5% Cooling 6% Cooling 6%

Lighting 22% Lighting 22%

Cooking 2% Cooking 2%

Office equipment 2% Office equipment 2%Computers 2% Computers 2%

Refrigeration 55% Refrigeration 55%

FIGURE 1: Electricity consumption by end use Refrigeration and lighting make up more than 75 percent of electricity consumption in groceries and convenience stores and offer significant opportunities for saving energy and money.

Water heating Office equipment 2% VentilationWater heating 1% Office equipment 2% 3% Cooking Ventilation Computers 1% 4% 1% 3% Cooking Computers 4% 1% Other 5% Other Cooling 5% 5% Cooling 5% Space heating 14% Space heating 14%

Refrigeration 47% Refrigeration 47%

Lighting 18% Lighting 18%

FIGURE 2: Energy consumption by end use, all major fuels Refrigeration, lighting, heating, and cooling account for nearly 85 percent of total energy consumption in groceries and convenience stores. The biggest savings opportunities come from the largest users of energy, but proactively managing the energy consumption of equipment that only comprises a small percentage of total energy use can also influence a store’s bottom line.

Spring 2013

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ENERGY EFFICIENCIES

money. The most commonly used settings are between –14° and –8° Fahrenheit (F) for freezers and between 35° and 38°F for refrigerators. Check refrigerated cases for air leakage. Inspect and replace worn seals and gaskets on refrigerator and freezer doors. Ensure that doors are closed or install automatic door closers to prevent heat from entering the refrigerator or freezer and increasing the energy required to cool units. Add strip curtains to doors of walk-in coolers. Check the refrigerant charge. Incorrect refrigerant charge can reduce equipment efficiency by 5 to 20 percent and raise the risk of early component failure. Have a licensed technician check the refrigerant charge annually. Clean evaporator coils. The buildup of dirt and ice on evaporator coils slows down the rate of heat transfer and causes the refrigeration system to use more energy to maintain the same temperature. LIGHTING Replace incandescent lightbulbs with screw-in CFLs. Replace incandescent lightbulbs that are on for longer than two hours per day with compact fluorescent lamps (CFLs), which are three times more energy efficient than incandescent bulbs and can last up to 10 times longer. If the existing bulbs are on dimming circuits, consider the use of cold-cathode fluorescent lamps. Install occupancy sensors. Wallmounted occupancy sensors that replace an existing wall

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Spring 2013

switch cost between $30 and $90 uninstalled. Occupancy sensors can save 30 to 75 percent in energy consumption when used in back offices, storage rooms, or restrooms. A less expensive alternative is to train staff to turn lights off when not in use. Use LEDs for exit and other signage. Retrofitting incandescent exit signs (which use around 40 watts) with light-emitting diode (LED) signs (which use about 3 watts) is easy. Many retailers sell white LED light strips that screw into the incandescent interface in an exit sign. These strips cost $20 or less for a two-“bulb” set, and payback is generally about two years. Replacing an incandescent exit sign with a whole new LED unit can save even more energy. An LED sign can cost from $30 to $250, and payback ranges from three months to four years. LEDs are also an efficient alternative to neon lighting for exterior and department signage. Consider dual-level switching. Convenience stores that are open all night may want to install dual-level switching for overhead lights, allowing some fixtures to be turned off at night or during low-traffic hours. Studies have shown that people prefer lower light levels at night.

setpoints by 2°F. 7-Eleven implemented this change and estimates that the company will save more than $5 million across its 6,300 chain stores in the U.S. Maintain minimum heating and cooling temperature settings in stockrooms and offices. Check economizer. Many air-conditioning systems use a dampered vent called an economizer to draw in cool outside air when it is available to reduce the need for mechanically cooled air. An economizer that is stuck open can let in too much outside air and ones that are stuck closed will not provide the benefit of free cooling. Have a licensed technician calibrate the controls; check, clean, and lubricate your economizer’s linkage about once a year; and make repairs if necessary. Check air-conditioning temperatures. With a thermometer, check the temperature of the return air going to your air conditioner. Then check the temperature of the air coming out of the register nearest the air-conditioning unit. If the temperature difference is less than 14°F or more than 22°F, have a licensed technician inspect your air-conditioning unit.

HEATING AND COOLING Change filters. Change airconditioning filters every month— more often if you’re located next to a highway or construction site where the air is dirtier.

Check cabinet panels. On a quarterly basis, make sure that the panels to your rooftop air-conditioning unit are fully attached, that all of their screws are in place, and that the gaskets are intact so no chilled air leaks out of the cabinet. Such leaks can cost $100/year, per rooftop unit in wasted energy.

Adjust thermostat settings. Raise air-conditioning setpoints by 2°F and lower heating

Clean condenser coils. Dirty coils can hamper heat transfer. Check coils quarterly for debris


that can accumulate, and wash coils at the beginning and end of the cooling season.

Longer-Term Solutions Although the following recommendations require more extensive implementation, they can dramatically increase the efficiency of your convenience store. For example, improving the efficiency of refrigeration systems can reduce energy use by 24 percent relative to standard practice. Ask your local utility representative about initiating these projects and find out what incentives are available for installed efficiency measures. REFRIGERATION Floating head pressure. This approach reduces the work of the compressor by allowing the pressure of the vapor coming out of it (the “head pressure”) to float—that is, to drop with reduced ambient temperatures. An expansion valve capable of operating at lower pressures and flow rates is required, and refrigerant pressures must be kept high enough to avoid

Evaporative condensers. Most condensers are air-cooled, but it is also possible to use evaporative condensers, which are cooled by water spraying over the condensing coils. Evaporative condensers are more energy efficient than aircooled condensers, but they require a water supply and added maintenance due to possible freezing, clogging, and mineral buildup. Evaporative condensers are probably most cost-effective in drier climates.

Anti-sweat heaters. Antisweat heater controls monitor the humidity levels in a store and automatically adjust the operation of refrigerated door heaters to keep the glass condensation-free. They are relatively easy to install and promise significant savings and quick payback. “Smart” defrost controllers. When installed in walk-in freezers, a smart defrost controller monitors several variables and optimizes the number of daily defrost cycles. Adding these controllers can save hundreds of dollars a year, depending on the size of the freezer.

Display-case shields. Aluminum display-case shields can reduce refrigeration load from the display case by 8 percent when applied overnight or when the store is closed. Products are kept colder when the shields are attached and remain colder for several hours after the shields are removed.

LIGHTING Replace T12 lighting with T8. Investing in lighting upgrades is one of the best ways to improve the customer experience, boost sales, and reduce energy bills. If your store uses T12 fluorescent lamps or older T8 lamps, replacing them with high-performance T8 lamps and electronic ballasts can reduce your lighting energy consumption by 30 percent or more while providing better light quality.

Evaporator-fan motors. Electronically commutated motors use about one-third the energy of the typical evaporator-fan motors in walkin coolers. Dropin replacement designs have made this retrofit relatively simple for a technician to perform. This upgrade can pay off within one year, depending on electricity rates. Also consider equipping walk-in coolers with advanced controls that slow or turn off evaporator fans when the cooler’s compressors aren’t running.

Update lighting in refrigerated display cases. LEDs offer several advantages over the fluorescent lamps that are typically used for refrigerated-display-case lighting. LEDs perform well in cold temperatures and allow light to be directed just where it is needed inside the case. The waste heat from LEDs can be moved outside the case, resulting in reduced refrigeration energy needs. All of that adds up to a 40 to 70 percent reduction in energy use from lighting in display

Spring 2013

ENERGY EFFICIENCIES

MISCELLANEOUS Reduce energy from plug loads. Using power strips for pluggedin devices can help eliminate phantom loads— the energy an electronic device consumes when switched off or into a low-power mode. “Smart” power strips with built-in occupancy sensors shut off devices such as coffee makers when not in use. Enable built-in power-saving settings on computers so they switch to a low-power operating state after a specified period of inactivity, and turn them off when not in use.

“flashing”—the unwanted vaporization of refrigerant. In one field test, operating a system with floating head pressure reduced annual electricity costs by 4.9 percent relative to operating with fixed head pressure.

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ENERGY EFFICIENCIES

cases and roughly 20 percent in refrigeration energy use. Consider relamping the building’s exterior. Use light levels recommended by the Illuminating Engineering Society of North America and fixtures that minimize light pollution. Consider lower-wattage metal halide lamps rather than highpressure sodium lamps. The former is less efficient than the latter in conventional terms, but it puts out more light in the blue part of the spectrum, which is easier to see under low-light conditions. LEDs are also an option; however, the cost and quality can vary widely so a trial installation is recommended. It will be easier to identify good products when the Energy Star program starts rating LED fixtures for parking lot applications.

Other Solutions

Install an energy-management system. Energy-management systems can be used to control temperature, humidity, lighting, and refrigeration. By automatically controlling setpoints and turning off equipment at night, these systems enable equipment to function more efficiently and effectively. Web-based control systems are becoming increasingly available and affordable for small retail applications. Consider reflective roof coating. If your store’s roof needs recoating or painting, using a highly reflective color or coating material will minimize the amount of heat that the building absorbs and can reduce peak demand and cooling energy use by 15 to 20 percent. Touchstone Energy Cooperative, Inc.; E Source Companies LLC.

More Eco-Tips for Your Business! • Turn off lights, computers, and other office equipment when not in use to cut back on high utility costs and your business’ carbon footprint. • Set-up an office recycling center in the break room or by employee’s desks for recyclable materials such as glass, plastic, aluminum, paper, and hazardous materials. • Ship eco-friendly by choosing environmentallyfriendly packaging materials, reuse whenever possible, and consider a green shipping program to offset the carbon associated with your business’s parcel and freight shipments. • Set specific energy reduction goals each month – by keeping track of your progress you’ll be more likely to acheve goals and be able to share your success with customers and stakeholders!

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REIMBURSEMENT FUND

Chairman’s View

What’s Next for the UST Reimbursement Fund?

Since its inception in 1989, the Petroleum Financial Assurance Fund has reimbursed tank owners almost $215 million for corrective action. The Petroleum UST Release Compensation Board estimates that another $29.8 million will be needed in the future to reimburse clean up costs for Fund-eligible releases discovered before June 30, 2012. An estimated additional $22.5 million will be needed to assess and clean up releases expected to be discovered during the next five years. The Board anticipates these costs will be reimbursed at an average of $9 million per year and it’s expected to be accomplished without an increase in the annual per-tank fees or deductible amounts and without the issuance of additional revenue bonds. As anticipated, the Fund’s unobligated balance (our cash reserve) rebounded from the early payoff of revenue bond debt in August 2010. The early payoff of the bonds, along with annual operating expenses

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and funding of the obligated account for the payment of claims, depleted the Fund’s unobligated balance to a low of $1.9 million during fiscal year 2011, but resulted in a savings of $2.1 million through avoiding further interest payments. Since that time, the unobligated balance increased to $12.9 million. By June 30, 2013, it’s anticipated the Fund will have an unobligated balance of about $22 million. Since the Board annually obligates money for claim payments anticipated to be made in the coming year, $9 million of this amount will be obligated on July 1, effectively reducing the unobligated balance to about $13 million as we head into the 2014 fiscal year. The Board historically invested monies in the Fund in the State Treasury Asset Reserve of Ohio (STAR Ohio). STAR Ohio is a highly-rated public investment pool administered by the State Treasurer. However, over the past several years, the return on STAR Ohio investments has significantly decreased. This

past year, the Board’s Finance Committee worked with the State Treasurer’s office to come up with new investment strategies to maximize the return on the unobligated monies held in STAR Ohio. At its January meeting, the Board approved the purchase of $3 million in U.S. Treasury Bonds and an additional $3 million in U.S. Agency Callable Bonds. These securities will have maturities laddered over a three-year period such that $2 million will mature annually. Upon maturity, these funds will be reinvested in similar instruments or, if necessary, will be returned to the STAR Ohio unobligated account to meet other obligations or expenses. In addition, as the unobligated balance continues to rebound and the amount of the longterm claim liability declines, the Board will begin to take a look at the possibility of reducing the per-tank fees or the deductible amounts. To gauge tank owners’ preferences on this issue, a survey was mailed with the 2012 fee statement/certificate application. About 3,500 surveys were mailed and 1,050 survey responses were received. Preliminary results show 6:1 that tank owners prefer a reduction in the annual per-tank fees rather than a reduction in the deductible amounts. Of the tank owners who preferred a lower deductible, 5% have filed a claim against the Fund. For the first time in the history of the Fund, the number of


the preparation and submission of the claim application and the Board’s internal claims review and settlement processes. As a result of this meeting, over the coming months, the Board will be revising the claim application so that less staff time is required in the review process. In addition, we will be looking at alternative ways to settle claims based upon the historical payout and time value of money. When implemented, these initiatives will help contribute to a reduction in the time between receipt of a claim application and its settlement.

As the Board heads toward 25 years of successful Fund management, its members will begin to assess past achievements and look toward setting long-term goals to ensure another successful and solvent 25 years. As always, if you have any questions, require assistance or would like to be placed on the Board’s mailing list, please contact the Board’s office at 614.752.8963. By James R. Rocco, Chairman, Petroleum UST Release Compensation Board

Spring 2013

REIMBURSEMENT FUND

claims settled outpaced the number of claims received in fiscal year 2011. Based on information available today, the Fund is on track for a similar outcome for the current fiscal year. Claim applications are currently processed at an average of 358 days from receipt. Although this response time has been consistent over the past several years, the Board continues to look at initiatives to reduce it. To this end, in August 2012, the Board’s staff met with representatives from five environmental consulting firms to talk about ways to improve and streamline both

29


CAPITOL BLEND

Legislative Success on the Horizon funding for every state program, agency and department. This year, however, several issues related to the budget process may have a direct impact on Ohio’s petroleum marketers and retailers.

by David Biemel Vice President, OPMCA Springtime is here, and there’s still much activity taking place on Capitol Square. We continue to receive positive feedback on the 2013 OPMCA Annual Meeting and Legislative Reception from both OPMCA members and state legislators. The association was able to educate decision makers about Ohio’s petroleum and convenience industry and successfully communicate how government impacts small businesses. For those who were able to attend the reception, thank you for your support! If you were unable to attend this year’s reception, we look forward to your participation in future years. While the Annual Meeting and Legislative Reception have been the focus for the past several months, we continue to watch as the Ohio General Assembly considers the next two-year state budget. This nearly five month process provides

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Due to its size, the state budget is broken up in several smaller bills for the legislature to approve individually. The two most important budget bills for Ohio’s petroleum and convenience industry are the transportation and operating budgets: The former deals with the state motor fuel tax and funds transportation projects, while the latter funds the vast majority of state government. This year’s transportation budget, which Governor John Kasich recently approved, keeps the state gas tax at its current rate of 28.0 cents per gallon and provides approximately $3 billion to the Ohio Department of Transportation (ODOT) in each of the next two fiscal years. The budget also creates a Joint Legislative Task Force on Department of Transportation Funding to study, on a broad scale, road and highway funding and how to ensure that ODOT has enough revenue to keep Ohio’s road system wellmaintained, which is critically important to our industry. The task force is also charged with studying the potential elimination of the gas tax. The task force has not yet held its first meeting, but OPMCA will closely watch its proceedings and will provide updates as necessary.

The main operating budget is still working its way through the Ohio House of Representatives’ committee process, but the House should approve and send it to the Senate by mid-April. With the many tax changes included in Governor Kasich’s budget proposal, we believe that now’s the time to achieve the legislative success we have sought since 2005: Moving the collection of the Commercial Activity Tax (CAT) to a single point, which will provide a level playing field to all petroleum marketers and retailers. We’ve met with dozens of state legislators since our Annual Meeting and the response has been unanimous: They understand the burdens posed by the CAT on our industry and they’re generally supportive of our solution. With that in mind, OPMCA is currently working with a legislative office to draft language to change the collection point of the CAT and to adjust its rate so the state will remain whole. We’re also working with our industry partners, as a united industry is crucial to our success. We’re optimistic the legislature will support our efforts and we will be working hard over the next few months to ensure success. It’s been a long road, but the end is finally coming into sight.


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SMOKELESS TOBACCO

Make Room for Growing regulation and taxation of cigarettes have led to many changes in the tobacco product line. If you drew a graph of America’s cigarette consumption over the last 100 or so years, you’d see a steady rise to a peak in 1981, then a persistent decline that shows no sign of slowing. In fact, if trends continue as expected, consumption will soon be half of what it was 30 years ago. And 30 years from now, who knows? The reign of cigarettes as the king of convenience stores’ in-store sales is not likely to end any time soon, but with consumption declining year after year, many retailers are wondering how far cigarette sales can fall.

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“In the convenience store sector, we’ve seen the numbers for sales and margin decline slowly over the years. This trend is likely to continue and, as an industry, we’ve got to be looking for alternatives,” said Corey Fitze, director of government relations for NACS. “The big question is: `What’s next?’” he said. More aggressive regulation of cigarettes, the rapid proliferation of smoking bans and increases in cigarette taxes at the federal, state and local level already have led many smokers to either quit or switch to less costly and more acceptable products, leaving retailers to ponder how to replace the lost sales. Sale of snuff, snus, e-cigarettes, lozenges, gum and a wide range of other smokeless products (OTP) are on the rise, but so far no worthy product has emerged that will take the place of cigarettes. For smokers, it seems, cigarettes are more than just a nicotine delivery system.

The average convenience store sold $624,768 worth of cigarettes in 2011, down 1.1% over the year before. At the same time, gross margin dollars per store dropped 2.6% to $91,188.

Up in Smoke

In 2011, cigarettes remained the top category in the convenience industry, delivering 18.2% of all in-store margin dollars, according to NACS State of the Industry (SOI) numbers. Sales totaled $53.7 billion and the average convenience store sold $624,768 worth of cigarettes in 2011, down 1.1% over the year before. At the same time, gross margin dollars per store dropped 2.6% to $91,188. As the numbers for cigarettes sales continue to drop, OTP and


“Electronic cigarettes offer many of the benefits of other smokeless products, but do so in a way that is familiar and enjoyed by current adult cigarette consumers,” said Murray Kessler, the company’s CEO.

Smokeless tobacco made up 59.9% of the OTP category, followed by cigars with 34.1% and papers with 3.7%. Smokeless was clearly the category’s biggest winner, with a 7.6% increase in sales.

At the same time, Nu Mark, a subsidiary of Altria Group Inc., makers of Marlboro, is launching a non-dissolving, lozengeshaped nicotine disc called VERVE as an experimental smokeless product. VERVE doesn’t contain tobacco, but rather nicotine derived from tobacco, which could allow it to escape the harsh healthwarning labels required for cigarettes and other tobacco products, including smokeless.

NACS SOI numbers make clear that retailers should be preparing for the days when cigarettes are no longer the sole go-to product for nicotine users. If you need another signal, take a look at Big Tobacco’s race into next generation tobacco and nicotine delivery products. “I don’t think anyone’s found the magic smoke-free product,” John R. Nelson, Altria Group’s executive vice president and chief technology officer told the Wall Street Journal recently. If not, it’s not for lack of effort and investment. Lorillard, the third-largest U.S. tobacco company and the maker of Newport cigarettes, this year spent $135 million to acquire blueCigs, which it called “the leading brand [of electronic cigarettes], offering the best consumer experience and unique social networking features, in the rapidly growing e-cigarette category.”

“Based upon our research, we believe that approximately 30% of adult smokers are interested in innovative types of spit-free tobacco product alternatives to cigarettes. We created this product in response to that interest,” said Altria’s Nelson.

Reynolds American is also betting on OTP, hoping the category will boost its net income by 35%, according to the Winston-Salem Journal. CEO/ President Daniel Delen revealed few details during a talk with analysts, but he did say that the company would debut products in vapor (like electronic cigarettes), nicotine extract items (like lozenges) and nicotine-replacement therapy by the end of 2012.

Sticker Shock

SMOKELESS TOBACCO

smokeless products have been on the march. Sales of OTP were up by double digits in 2009 and 2010. Last year, they performed well but not as well as in the two prior years, jumping by just 3.6% and generating $6.7 billion overall.

Delen recently told the Wall Street Journal that the retail price of cigarettes is causing smokers to consider new alternatives. “Where do they mostly buy their tobacco? It’s gas and convenience stores. If there’s sticker shock at the pump, when they walk inside to buy their cigarettes, they are in a price-sensitive moment of the day,” he said. “We have about a 30% margin on cigarettes and about 50%

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Spring 2013

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SMOKELESS TOBACCO

on smokeless, so there are benefits that way. But it’s not just about the bottom line. You start looking at long-term sustainability,” Delen added. To be sure, nicotine in itself is not a healthy substance. It has been linked to cardiovascular problems, high blood pressure and diabetes. Unlike tobacco, however, it has never been linked to cancer and that’s a pretty significant distinction. This puts some anti-smoking activists in an awkward position when it comes to their opposition to nicotine delivery systems that do not produce smoke. There is no second-hand exposure and, even for the user, there is no doubt that nicotine alone carries a fraction of the health risks of smoking. This would seem to be a sensible alternative, as the places smokers can light up become fewer and fewer and the costs of tobacco products, especially cigarettes, become greater and greater. In 2009, the federal excise tax on cigarettes increased by 158%, raising the price of a pack of smokes by 62 cents. In addition to federal excise taxes, every state collects its own tax and many of those taxes have increased as well. The national mean cigarette excise tax among all states increased from $1.34 per pack in 2009 to $1.48 in 2011. These stressors are not just pushing smokers toward other products; they also are pushing them away from convenience stores and other retailers and into illegal black markets.

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Sale of snuff, snus, e-cigarettes, lozenges, gum and a wide range of other smokeless products (OTP) are on the rise, but so far no worthy product has emerged that will take the place of cigarettes. State cigarette smuggling has increased dramatically in 2011, with smugglers taking northsouth routes to unload cargo in destinations such as New York City, where the combined city and state taxes total $6.46 a pack. At the same time, Internet sales continue to undercut local store prices by skirting state taxes. In other counties, such as Canada and New Zealand, tobacco displays have to be removed from view in retail locations, leaving many to wonder if such a move will ever occur in the United States. Legal cases are currently still pending over the FDA requirement of graphic warning labels on cigarette packaging. The regulatory future of tobacco retailing is still uncertain. Product Development Tobacco’s use in western civilization dates at least to Christopher Columbus’ early encounters with Native Americans who had been using it in their religious and medical practices. Tobacco was the first crop grown for profit in America. Cigarette smoking increased dramatically in the United States and globally well into the 20th century. It wasn’t until 1964 that the Surgeon General issued his famous report linking chemicals in cigarettes to lung cancer. Over the years, the tobacco industry has toyed with genetically modifying tobacco

plants to make them less addictive and carcinogenic. One result came from Vector Tobacco, a part of cigarette maker Liggett Vector Brands, which sought to market cigarettes with fewer carcinogens and lower levels of nicotine. Ever hear of OMNI cigarettes, with less carcinogens? Or QUEST, now with less nicotine? That’s because they were both epic flops. The company wrote that the product line failed because the message of a healthier cigarette failed to resonate. It failed “due, in part, to the lack of success of its advertising and marketing efforts in differentiating OMNI from other conventional cigarettes with consumers through the ‘reduced carcinogen’ message.” The tobacco industry also tried going in the other direction, modifying tobacco to more than double its nicotine levels. Brown and Williamson’s Y-1 strain of tobacco is a famous example, seized upon by anti-tobacco crusader David Kessler, who was commissioner of the FDA back in the 1990s. Later, he declared that Y-1 “represents a dramatic attempt to manipulate nicotine.”

Nicotine Nix?

More recently Kessler said the FDA should force big changes on Big Tobacco, including setting limits on the amount of


nicotine cigarettes can contain. “Getting nicotine down to levels that smokers no longer crave cigarettes,” he said, “could save 200,000 to 300,000 lives a year.”

If cigarettes are not long for the American consumer market, convenience stores will be facing a seismic shift in their product lines. And while it certainly isn’t going to happen

cigarette increased from 1.1% in 1998 to 1.6% in 2005.

“In fact, I expect that fall will accelerate, once the FDA mandates removal of nicotine and once local and state governments start barring the sale of cigarettes – which will happen sooner than most people realize,” Proctor said.

“Nicotine yield in smoke was positively associated with nicotine concentration in the tobacco and the number of puffs per cigarette, both of which showed increasing trends during the study period,” the report said.

If Proctor is correct that cigarettes are not long for the American consumer market, convenience stores will be facing a seismic shift in their product lines. And while it certainly isn’t going to happen overnight, it’s never too early to prepare.

Cutting or even eliminating nicotine from cigarettes is not really the answer, as the failure of reduced nicotine brands have shown. Smokers smoke, pretty much, for one reason and that’s to get nicotine into their systems in a way they enjoy.

This article appeared in the September 2012 issue of NACS Magazine and was reprinted with permission from NACS, The Association for Convenience & Petroleum Retailing, www. nacsonline.com.

SMOKELESS TOBACCO

Despite its widespread use over thousands of years, there are those who foresee a day when nicotine use is outlawed or declines to near zero because of health implications. “I do think nicotine is nearing the end of its 5,000-year run,” said Robert Proctor, a Stanford University professor and author of Golden Holocaust, which makes a case for the abolition of cigarettes.

overnight, it’s never too early to prepare. Actually, though, the nicotine in cigarettes has been increasing in recent years. According to a study by researchers at Harvard School of Public Health, Division of Public Health Practice, the amount of nicotine yield per

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FOUNDERS’ CIRCLE

Customers Maximize Savings at the Pump

Shell Offers Fuel Rewards Network™ (FRN) Program participating Shell station and activate it at fuelrewards.com. The best thing about the FRN program is that it offers so many opportunities to earn rewards, making it easy for consumers to save big. Here are a few of the ways they can save*: Imagine if consumers could impact how much they pay at the pump and save as much as three or more dollars per gallon on fuel. Now they can, thanks to a revolutionary cents per gallon rewards program that helps consumers save on fuel purchases at participating Shell stations coast-to-coast. The Fuel Rewards Network™ program—or FRN™ program—empowers consumers to lower their fuel prices significantly at the pump simply through the everyday purchases they’re already making. The FRN program is owned and operated by Excentus Corporation and is now available in more than 180 cities nationwide! Participating in the program is easy. All consumers need to do is sign up and request a Fuel Rewards Network™ Card online at fuelrewards.com and start turning everyday shopping into rewards for instant fuel savings on all three grades of Shell Nitrogen Enriched Gasolines including Shell Diesel, at participating Shell stations. They can also pick up a Fuel Rewards Network Card at any

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• Dining Out: Dine out with the Fuel Rewards Network program at one of more than 10,000 participating restaurant locations nationally and earn Fuel Rewards savings. Consumers just need to link their debit or credit card(s) to their Dining Account, and for every $50 spent dining they earn 10 cents per gallon savings on their next fuel purchase. • Online Mall: The Online Mall gives consumers access to nearly 700 brand name online merchants offering a 5 cents per gallon savings for every $50 they spend. Some merchants may offer 2x, 5x, 10x rewards or more—so consumers can multiply their savings! • Shell Fuel Rewards: Consumers can purchase specially marked products inside the convenience store as well as car washes and auto services at participating Shell stations and can earn even more Fuel Rewards savings. • eCoupons: Digital coupons available for select retailers in select markets provide additional cents per gallon savings when the digital coupon is selected at

fuelrewards.com and the item is subsequently purchased at a participating retailer. Select eCoupons at fuelrewards.com and earn Fuel Rewards savings on select items at participating grocery and drug stores in select markets. And, for iPhone and Android users, there is now an FRN iPhone App and FRN Android App available for download to help you check your rewards balance and expiring rewards, find places close by to help you earn more rewards, get fuel prices so you find the best places to save and view your recent transactions. For more information about the Fuel Rewards Network program, visit fuelrewards.com or the Fuel Rewards Network program page at www.facebook.com/ fuelrewards. *Note: the ways to save vary by market. Please visit fuelrewards.com for information applicable to your location.

The Founders’ Circle is a new membership level that pays tribute to our association’s roots and recognizes power created by a strong collective voice as we help shape the future of Ohio’s small businesses in the petroleum and convenience industry. Its members are a distinguished group of partners who, like the founding members of the OPMCA, have demonstrated a heightened level commitment toward creating a positive business environment for our members and advancing our industry.


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NLRB ENFORCEMENT

Employers Are Scrambling To Keep Up Think NLRB Enforcement Doesn’t Apply to You? Think Again. All employers must pay extremely close attention to the National Labor Relations Board (NLRB) regardless of whether your company has a union. Many laws impacting virtually every company have changed over the past several months. Are you keeping up with the changes? The NLRB is tasked with the duty of enforcing the National Labor Relations Act (NLRA). The NLRB has historically governed relations between employers and unions representing their employees. President Obama’s Board (board members appointed by the President) has aggressively expanded the scope of the NLRB and is imposing itself upon non-union companies and making life more difficult for companies with unions. For those who do not deal with unions regularly, Section 7 of the NLRA states that “Employees shall have the right to selforganization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities.” The Board uses this language to regulate social media, at-will disclaimers in handbooks, and confidentiality during workplace investigations.

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A Pro-Union Agenda Impacts All Employers

The NLRB is made up of five Members who are usually appointed by the President and confirmed by the Senate. The political affiliation of the Board is supposed to include two Republicans, two Democrats, plus one from the President’s party. Under President Bush, there were usually three Republicans and two Democrats. Under President Obama, there are currently three Democrats and zero Republicans. The Obama Board Members include a former General Counsel of the International Union of Operating Engineers and a former union attorney who long represented the Teamsters, SEIU, and the CWA. Together these individuals have, and will, continue to create union-friendly laws such as: Micro Bargaining Units­— Unions can now organize employees by job titles instead of the traditional “community of interest” standard. Employers face the likelihood of several small bargaining units that are easier to organize and several union contracts that are more difficult to administer. For example, the ladies’ shoe department of a major department store was recently permitted to unionize, paving the way for the men’s department, perfume counter, children’s section, housewares, men’s suits, and handbag departments (17

different departments for 382 employees) to all be represented by different unions and have different collective bargaining agreements providing for different workplace rules and regulations. Persuader Rules—This rule is not yet in effect but seeks to force companies to disclose to the federal government where and from whom they receive labor relations advice and how much they paid for that advice, whether spending $20 at a luncheon listening to a speaker or several thousand dollars defending a union organizing drive. Labor lawyers, like me, believe this rule violates the attorney-client privilege. Social Media—When tweets, Facebook posts, and the like are considered “protected concerted activity,” employers are not allowed to discipline or discharge employees for engaging in such conduct. Protected concerted activity is when an employee acts on behalf of a group of employees regarding a term or condition of employment. For example, a tweet like “I hate my job. My boss plays favorites, and we don’t make enough money to put up with that” is likely protected concerted activity, and that employee—regardless whether she is in a union— cannot be disciplined or discharged despite possibly breaking several employment-


‘open door’ policy…Complaining to your fellow employees will not resolve problems.” This policy supposedly prohibited employees from speaking to co-workers about terms and conditions of employment.

Arbitration Agreements—The NLRB prohibits employers from requiring employees to sign arbitration agreements preventing them from engaging in collective or class action litigation.

At-Will Disclosures—A handbook clause stating an employee’s at-will status can be changed only by a corporate executive may lead an employee to believe that being represented by a union or having a collective bargaining agreement would be futile because neither of those could alter the at-will status. As such, the Board has forced non-union companies to change the at-will language in their handbooks.

End of Confidential Workplace Investigations—The hallmark of a workplace investigation is the information provided remains confidential until all the facts are uncovered and a decision is made. While human resources departments cannot promise anonymity in investigations, most policies ensure as much confidentiality as possible. These policies are now unlawful according to the NLRB. Subject to certain limitations, employers cannot require confidentiality during ongoing workplace investigations. Specifically, discussing an investigation with co-workers is considered “collective activity” under the NLRA and trumps workplace policies of confidentiality during investigations. Open Door Policies—The following policy from a handbook violated the NLRA: “Voice your complaints directly to your immediate supervisor or to human resources through our

Moonlighting Policy—A moonlighting clause banning employees from outside employment without prior written consent from the employer may now violate the NLRA if it has an unlawful motive or was implemented with anti-union animus, i.e. to prohibit union organizers from obtaining employment at nonunion companies. This change is troubling from a broader perspective: the NLRB now examines the intent behind policies to determine whether otherwise valid policies are invalid. Limiting Off-Duty Employees’ Access to Company Property— Limiting off-duty access to the workplace except with

management approval or when employees are engaging in employer-related business is unlawful because the limitation could prevent employees from engaging in Section 7 rights, like union organizing, without management’s approval. Work During Working Hours— A company rule requiring employees to only perform work during working hours violates the NLRA because such a rule could confuse employees into believing that they cannot engage in union solicitation during breaks and lunches. According to the NLRB, “working hours” now means time when you are at work, not time spent actually working.

NLRB ENFORCEMENT

related policies. Further, the NLRB’s strict rules of acceptable social media policies result in the vast majority of policies violating the NLRA. Seeking legal advice before implementing a social media policy is prudent.

Impact on Unionized Employers

The NLRB’s pro-union agenda does not just focus on non-union employers. Companies that deal with labor unions on a daily basis must also be cognizant of several major changes in the law, including: Discipline—Employers must now bargain with a union over discretionary discipline during negotiations for a first collective bargaining agreement. Dues Deduction—In overturning a 50-year law, employers must now continue automatic dues deduction after the expiration of a union contract. Spring 2013

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NLRB ENFORCEMENT

Beck Objectors—The NLRB believes that lobbying expenses are relevant to the union’s duties as bargaining agent and thus chargeable back to Beck objectors. Witness Statements—In overturning a law from 1978, witness statements from employees to employers are no longer exempt from disclosure to unions absent assurance of confidentiality to employees, nor do they qualify as privileged under the attorney work-product doctrine unless “specifically created in anticipation of foreseeable litigation.” Backpay—In most cases where backpay is awarded as a remedy, the losing employer not only has to pay the backpay (and interest), it must also pay the employee’s increased taxes associated with the backpay, i.e. social security and income taxes.

Forecast for the Future

While much of what the NLRB will do in 2013 is still undetermined, below are some possible future changes. With the uncertainty surrounding the constitutionality of President Obama’s appointments to the NLRB, whether these changes will ever take effect is unclear. However, these are drastic changes that you should be aware may become a reality. Of course, OPMCA will let you know if and when they become law. Shorter Election Cycles— Currently, the time between when a union files a petition to represent employees and the representation election averages around 45 days. Statistically, the shorter the time period, the 40

Spring 2013

likelier employees will vote in favor of union representation. The NLRB has opined that this period should be “as short as possible” and “quickie elections” with time periods as short as 5-7 days is likely. Employers should actively engage in unionavoidance and pro-employee relations now, as waiting to campaign against unionization until after a representation petition is filed is too late. Hang the Poster—Employers may be required to hang a poster throughout the workplace that specifically informs workers of their right to organize a union and how to learn more about the process of organizing a union. Unions Granted Equal Access— Currently, an employer’s property is its private property and unions, for the most part, are not allowed to trespass. Unions will likely receive greater (if not equal) access to an employer’s property to engage in union organizing activity. Email for Union Organizing— Currently, an employer can place restrictions on how its employees utilize companyfurnished email accounts and electronic devices. This will likely change. For example, organizers will be permitted to solicit employees to attend the next organizing meeting, and prounion employees will be allowed to openly campaign in favor of unionization through company provided technology. Card Check—Richard Tumka, head of the AFL-CIO who claims he talks to the White House every day and visits a few times each week, promised that if

Obama won a second term as President, that card check will be a reality. The only thing standing in way of card check is a Republican controlled Senate. If Democrats regain control of the Senate in 2014, card check will be a reality. Temporary Workers—Currently temporary workers do not pay union dues and do not work under the confines of a union contract. It is anticipated that temporary workers—who are not employed by the unionized employer—will have the right to organize and belong to a union alongside the employer’s regular, full time employees.

What Should OPMCA Members Do?

OPMCA members should continually educate themselves about the onslaught of grave labor law changes from the NLRB. Employers must train supervisors on compliance matters as well as unionavoidance strategies to diminish the NLRB’s governance of your company as much as possible. Companies are encouraged to seek legal counsel to ensure they are complying with the law, as even the smallest form of non-compliance can result in significant penalties to your company. Matt Austin is a Columbus, Ohio labor lawyer who owns Austin Legal, LLC, a boutique law firm with offices in central and northeastern Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. Matt can be reached by email at Matt.Austin@Austin-Legal.com or by phone at 614.285.5342


Too Busy To Protect Your Business? Even the best businesses can have claims. Contact your local Federated representative to learn more about risk management resources, like a distracted driving program, designed to help keep your business on the right road. Visit www.federatedinsurance.com to find a representative near you.

Federated Mutual Insurance Company • Federated Service Insurance Company* • Federated Life Insurance Company Owatonna, Minnesota 55060 • Phone: (507) 455-5200 • www.federatedinsurance.com *Not licensed in the states of NH, NJ, RI, and VT.

© 2013 Federated Mutual Insurance Company


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Spring 2013