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Dear PEI Member:

We met with over 100 members in February at various industry meetings. Based on what they told us, here's our take on the prospects for the rest of the year.

Business will be "comfortable" for most distributors during 2007. Nothing spectacular, just good and steady. One of the primary reasons for this optimism is that PEI distributors have largely succeeded in diversifying their operations over the past 10 years and have reached the point where they are not dependent on any one customer segment, product line or service offering. Nowadays it's more than building new retail stations and doing vapor recovery and underground tank work. While those markets are still important to PEI distributors, they no longer dominate their business strategy.

With increasing frequency, members we talk with make the point that they are different than "the normal PEI guy" who concentrates on the retail motor fuels market. Members have found the commercial, military, mining and transportation markets provide better profit with less competition. Distributing and installing equipment for truck stops, bulk plants, lube centers, terminals, commercial fueling depots, and emergency generator systems account for an ever-increasing proportion of sales. On the installation side, some members have branched out as general contractors, serving markets other than the motor fuels industry.

There are a few pockets around the country that seem to offer unique opportunities and challenges. Florida, with its mandatory tank upgrade program, is going gangbusters and should continue that way until the 2009 deadline. The ethanol craze in the Midwest provides great opportunities for tank manufacturers and distributors providing equipment and services for the increasing number of ethanol and biodiesel plants under construction and on the drawing board. California members are encouraged--although there are not many orders and not much work yet--about their involvement in the state-required enhanced vapor recovery upgrade program (see following article). On the down side, Michigan members continue to deal with their "one-state recession" brought about by the problems plaguing the auto industry.

Properly conceived, financed and managed, there are ample opportunities for PEI members to thrive in today's business environment. The economy is humming along; money is available. We don't see any reason why 2007 shouldn't be a good year.

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CARB WARNS GAS STATIONS ABOUT STAGE II EVR UPGRADE DEADLINE
Approximately 13,000 gasoline dispensing facilities will need to obtain permits, purchase equipment and install Stage II enhanced vapor recovery (EVR) systems to upgrade their stations by April 1, 2009, according to the California Air Resources Board (CARB). The Agency warns that there could be a shortage of certified contractors if gasoline dispensing facility owners wait too long to install their EVR systems.

Contractors who install EVR systems must receive required manufacturer training and/or certification. In addition, contractors may be required to obtain air district training and ICC certification as an approved vapor recovery installer. CARB recommends that contractors verify training/certification requirements with air district staff before beginning installation of EVR systems. CARB also recommends that gasoline dispensing facility operators contact their local air district for specific information on local vapor recovery requirements before modifying the facility.

GAO: LEAK CLEANUP TO COST $12 BILLION
Cleaning up half the leaks from underground storage tanks could cost taxpayers as much as $12 billion, according to a Government Accountability Office (GAO) report issued February 22. GAO also found that any delay in the cleanup increases the potential for contamination to spread and damage the environment and human health. The GAO is the investigative arm of Congress.

After conducting a comprehensive survey of the states, the GAO found cleaning up 54,000 of the 117,000 known leaks will cost $12 billion in public funds from state and federal sources. It is expected that tank owners/operators will foot the bill for cleaning up the other 63,000 releases. The GAO also said that 43 states expect to confirm about 16,700 new releases in the next five years that would require at least some public funds for cleanup. The average cost to clean up a site is approximately $125,000. Other findings include:

• There are concerns that, by paying the bulk of cleanup costs, state financial assurance funds may provide disincentives for tank owners--who pay only a relatively small deductible--to prevent releases.
• Several state assurance funds may lack sufficient resources to ensure timely cleanups.
• While 16 states require annual proof of financial responsibility coverage, 25 states check owners' coverage less often or not at all.

The 112-page report is available at www.pei.org/frd.

COALITION PUSHES WIDER ETHANOL USE; MORE ETHANOL DISPENSERS
A coalition of farm groups, hunters, environmentalists and some business interests favoring expanded use of ethanol is lobbying for $64.5 billion of new federal incentives over the next five years to achieve its goal. The group, called the 25X'25 Renewable Energy Alliance, gets its name from its target of producing 25 percent of the nation's energy from farm, ranch and forest products by 2025.

One aspect of the plan is to increase the number of locations offering E-85. The new plan calls for Congress to require owners of 10 or more gasoline stations to install dispensers that deliver an 80 percent blend of ethanol when the percentage of cars equipped to use such fuel reaches 8 percent in the surrounding area. It also calls for auto makers to equip 50 percent of their cars to use E-85 by 2012, or pay a fine of $1,000 per vehicle.--The Wall Street Journal, February 28, 2007.

ETHANOL PRODUCTION IN 2006
The United States and Brazil produce 70 percent of the world's ethanol, in more or less equal amounts. Brazil was responsible for 65 percent of global ethanol exports in 2006. That year, 57 percent of Brazil's ethanol exports went to the United States, and 11.8 percent went to Central American and Caribbean countries, where some of it was further processed and re-exported to the United States under no-tariff trade agreements. Brazilian ethanol exports that go directly to the United States are subject to heavy tariffs. The United States makes ethanol primarily from corn, and Brazil makes it from sugarcane, which is far cheaper and more efficient.

PEI MEMBER NOTES
OPW Fueling Components, Cincinnati, Ohio, has added a new business unit to its organizational structure that will be called OPW Fueling Containment Systems. The new unit, based in Smithfield, North Carolina, will manufacture fueling containment products under the OPW brand name. OPW Fueling Containment Systems will focus exclusively on primary and secondarily contained fuel delivery systems, including flexible coaxial fuel pipe and fittings, liquid tight and testable containment sumps and impermeable fueling hose, among other products. Michael McCann, who most recently served as vice president of dispensing products for OPW Fueling Components, has been named president of the new business unit.
Outsite Networks, Inc., Norfolk, Virginia, has announced several new appointments and promotions. Brad Christiansen has been named western regional sales manager and Wim Vanderbijl has been appointed client services director. Sara Herkner has been promoted to senior account manager and Kelly Hampton has been added as an account manager. 

BERRY-HINCKLEY SELLS TO HERBST
Berry-Hinckley Industries, Reno, Nevada, has sold its businesses to Jerry Herbst, owner of the Terrible Herbst convenience store/gas station chain. The businesses, all located in Northern Nevada,  include 33 Winner's Corner c-stores and Chevron stations, along with three car washes.

NUMBER OF USTS IN UNITED STATES DECLINING
The number of active underground storage tanks decreased by approximately 2% or 12,000 storage tanks to 641,881 during fiscal year 2006, according to the U.S. Environmental Protection Agency (EPA) Office of Underground Storage Tanks (OUST). The number of tanks nationwide has been declining for the past several years.

STI/SPFA ELECTS NEW BOARD MEMBERS
Seven of the eleven people recently elected to serve on the board on directors of the Steel Tank Institute and Steel Plate Fabricators Association are PEI members. They include Sonny Underwood, Mid-South Steel Products, Inc., serving as chairman of the board; Chuck Travelstead, Brown-Minneapolis Tank Co., serving as president; and Ron Houston, J. L. Houston Co., serving as treasurer. PEI members serving as STI/SPFA board members include Tim Woofter, Stanwade Metal Products, Inc.; Charles Frey, Jr., Highland Tank Co.; Alan Reitz, George I. Reitz & Sons; and Terry Cooper, B & H Tank Corporation (P.E.S. Inc). Underwood is a former PEI president, Cooper currently sits on the PEI board of directors, and Woofter has served two terms on the PEI board.

MEMBERSHIP APPLICATIONS
Texas distributor. J.A.M. Equipment Sales & Service, P. O. Box 590026, Houston, Texas 77259, has applied for distributor division membership. Linda Meyer is business development manager for the firm, which was established in 1992. The company represents Balcrank, EmcoWheatn, FuelMaster, Graco and Rotary. Nominated for PEI membership by Andy Olive, FuelMaster, Tallahassee, FL, and James Mattes, Graco, Minneapolis, MN.
Arizona service and repair contractor. Rush Petroleum, L.L.C., P. O. Box 2663, Litchfield Park, Arizona 85340, has applied for affiliate division membership. Gayla McCormick is secretary/treasurer for the firm, which was established in 2005. The company services, repairs and tests petroleum equipment. Nominated for PEI membership by Bryan Weber, WeberGroup, Chandler, AZ.
Australia consulting firm. JFTA Pty. Ltd., P. O. Box 1015, Campbelltown, NSW, Australia 2560, has applied for affiliate division membership. Colin Taylor is CEO for the firm, which was established in 1975. The company provides engineering, construction and environmental services to the petrochemical industry. Nominated for PEI membership by Dennis Rethmeier, WesternPmp, San Diego, CA.
Finance and leasing company. American Equipment Finance, 258 King George Road, Warren, New Jersey 07059, has applied for affiliate division membership. Lisa Marino is business relationship manager for the firm, which was established in 1986. The company provides financing and leasing. Nominated for PEI membership by Susan J. Scott, JWScott, Trenton, NJ.
Texas installation and service company. JRC Maintenance, 2185 Falconwood Drive, San Marcos, Texas 78666, has applied for affiliate division membership. J. R. Chisam is owner of the firm, which was established in 1973. JRC designs and builds aviation fuel storage systems, and installs and removes fuel tanks. Nominated for PEI membership by Mark Barron, PtrSolutns, McAllen, TX.

Admitted to PEI

• Excell Environmental, Inc., Austin, TX (dis)
• Capital Equipment Leasing, Inc., Beaverton, OR (aff)
• Anysafe Safety Equipment Co., Ltd., QingDao City, China (aff)
• EUST Co., Ltd., Seoul, Korea (aff)
• Forecourt Solutions Ltd., Taunton, Somerset, United Kingdom (aff)
• Tiger Enterprises Inc., West Palm Beach, FL (aff)
• Felipe Cordoba, ExxonMobil, Fairfax, VA (O&E)

©2006
Petroleum Equipment Institute
P. O. Box 2380
Tulsa, OK 74101-2380

The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Robert N. Renkes, Executive Vice President, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.