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Dear PEI Member:

Ask PEI members what they perceive to be the greatest opportunity for our industry in the years ahead and about 50 percent will say “providing equipment and services to meet government regulations.” Not a response that will cause goose bumps to appear on your arms, but it is what it is. This summer should provide a great deal of insight about where the industry is likely to be headed on the regulatory compliance front. Consider:

Stage II vapor recovery. The Clean Air Act (CAA) directs state or local air pollution control agencies with “moderate” or worse nonattainment areas to require Stage II vapor recovery systems (VRS) at gasoline dispensing facilities. The CAA also states, however, that Stage II shall not apply in moderate areas after onboard refueling vapor recovery (ORVR) is promulgated. In addition, the CAA provides that EPA may revise or waive the Stage II VRS requirement for “serious” or worse ozone nonattainment areas after EPA determines that ORVR control systems are in “widespread use” in U.S. motor vehicles. To date, EPA has not issued any guidance on the definition of widespread use.  

A meeting will be held May 1 with federal and state air quality officials in Manchester, New Hampshire, to discuss ORVR incompatibility with Stage II vapor recovery systems, the definition of “widespread use,” and issues relating to the transition from a Stage II to an ORVR program.

Prediction: This is the first time that I can recall EPA publicly discussing the transition from a Stage II program to an ORVR program. Although I don’t expect EPA to define “widespread use” for a while yet, the fact that they will start discussing the transition to ORVR systems and talk about the proper removal of Stage II vapor recovery equipment leads me to believe that in four to five years we will see Stage II vapor recovery disappear in some states.  

Financial responsibility for installers and manufacturers of tanks and piping. According to information posted on the PEI web site (www.pei.org/energyact), Missouri and Kansas will soon require manufacturers of tanks and piping and installers of underground storage systems to show proof of financial responsibility to continue to do business in those states. Missouri indicates that its regulations will be effective June 1, with Kansas following suit on July 1.

PEI Learning Center Online training for underground petroleum storage tank operators and managers.

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Several tank and piping manufacturers have been quoted in the trade press in recent months saying that it’s unlikely they will continue to do business in those states once the financial responsibility regulations become effective. Last month the Steel Tank Institute wrote a three-page letter to the US EPA that concluded:

Our industry strongly disagrees with the 30-year time frame established within these provisions. Such insurance will be difficult to obtain and possibly impossible to maintain for a 30-year time frame. As a result, Steel Tank Institute cannot recommend that its tank fabricating members do business in states that impose the EPA recommended financial responsibility within their state.

Other states that have not yet decided which option (financial responsibility or secondary containment) to implement may be waiting to see which manufacturers decide to sell tanks and piping in states that require financial responsibility.

Prediction: This is a tough one. Because of the size of the markets involved and the requirement that manufacturers carry insurance for releases caused by workmanship defects for 30 years—29 years more than most current warranties provide—it’s our gut feeling that more than half of the manufacturers currently doing business in Kansas and Missouri will elect not to do business in those states. We won’t know for sure until certificates of insurance or proof of financial responsibility have to be filed.

National biofuels legislation. Ambitious proposals to reduce US oil dependence are popping up in Washington. This reflects the growing support from Congress and the White House to do something about renewable fuels. On March 26, US automakers pledged that half of their production by 2012 would be flexible-fueled vehicles (FFVs), able to run on either gasoline or E-85. In return, the automakers want some assurance from the government and the oil industry that the E-85 and biodiesel infrastructures will be improved to make these fuels more available. The oil industry predictably wants more than the 5 to 6 million flexible-fueled vehicles currently on the road before they commit to offering E-85 and biodiesel at more locations.

Prediction: The high price of gasoline will push Congress to pass some sort of legislation this summer that will expand the existing renewable fuels mandate of 7.5 million gallons of renewable fuels by 2012. The legislation will also encourage building a renewable fuels infrastructure and increasing the number of flexible-fuel vehicles through loan guarantees and grants. Some type of refueling infrastructure and FFV mandate is not out of the question.

Temperature compensation. The National Conference on Weights and Measures may vote on a proposal in July to allow—not require—automatic temperature compensation (ATC) at retail dispensing devices. If passed as offered, the language allows the states to decide if they want to compensate for temperature at the pump. Missouri and Texas are already considering legislation to require ATC. Senator Barbara Boxer has gone on record saying that temperature compensation should be implemented in California as soon as possible.

Most petroleum marketers are resisting the proposed change and have formed a national coalition called the Partnership for Uniform Marketing Practices (PUMP). Members of the PUMP coalition will ask government officials and regulators to conduct a comprehensive cost-benefit analysis of the temperature compensation issue to determine the real costs to consumers compared to the benefits, if any, from ATC before any decision is made to require ATC.

Prediction: A recent three-minute segment on Good Morning America has brought the issue to most everyone’s attention. Consumer advocacy groups are strong and loud on this issue and governors from warm states might instruct their weights and measures officials to vote for the permissive language. On the other hand, petroleum marketers have had strong positions on this issue for decades and all attempts to allow ATC at the retail level have failed. The petroleum marketers are very well organized and united on this issue. Expect nothing to happen in July except to return the issue to the Laws and Regulations Committee to study until next year.    

E-85 dispensers. Underwriters Laboratories (UL) currently expects to finalize research and publish certification requirements by the end of the fourth quarter of 2007 and, immediately thereafter, accept E-85 dispensing equipment for safety evaluation and certification, according to a statement issued by the company March 22. In order to facilitate the availability of E-85 dispensers, UL says it plans to accept dispenser evaluation and certification requests immediately after its research is completed and prior to initiating its Standards Technical Panel (STP) process. UL says that these requests will be considered under provisional certification standards and probably acted on well before a consensus standard for E-85 dispensing equipment is developed.

Prediction: There will be a UL-listed E-85 dispenser in 2008.

MARKETING ETHANOL BLENDS OVER 10 PERCENT
The US EPA told the Petroleum Transportation & Storage Association (PTSA) that agency enforcement officials are concerned about marketers selling E-20, E-30 and E-40 blends without any restriction on which vehicles may fuel with the blend. Federal law prohibits the use of ethanol concentrations above 10 percent in vehicles with conventional gasoline powered engines. To date, federal regulations require that dispensers with ethanol concentrations above 10 percent be clearly labeled with a warning decal informing consumers that the fuel is for use in flex-fuel vehicles only. Other than labeling the dispenser with the appropriate dispenser decal, EPA offers no specific information on how marketers should protect against misfueling.—PTSA Weekly Update.

C-STORES SALES UP; PROFIT DOWN
Convenience store industry sales rose 15 percent in 2006, according to data released April 11. Industry profits in 2006 decreased 23.5 percent, falling to $4.8 billion. The decrease was largely attributable to a drop in motor fuel margins and the continuing escalation of credit card fees. Motor fuels sales now account for 71.3 percent of total convenience store industry sales, but only 33.7 percent of industry profits. The convenience store industry accounts for 82 percent of the motor fuels marketed in the United States.

PEI MEMBER NOTES
Hockman-Lewis Limited is celebrating the 75^th anniversary of the company’s founding in 1932 by J. L. Hockman. The company represents manufacturers from many countries including Italy, China, Argentina and Brazil as well as the United States. Products made by these manufacturers are marketed through their regional offices in Mexico, Miami (Latin America), Thailand and New Jersey. The company also owns and operates distribution companies in Latin America. William S. Hockman, son of the company’s founder, is chairman and his son, Greg Hockman, is the president.
 
Petroservice, headquartered in Saint John, New Brunswick, has relocated its Halifax, Nova Scotia, branch office to 14 Akerley Boulevard, Dartmouth, Nova Scotia. The new facility is twice the size of the company’s Halifax location and will permit Petroservice to provide a local training facility and to utilize expanded warehouse space.

Fiber Glass Systems, Little Rock, Arkansas, has named Wilson/Rogers & Associates, Bothell, Washington, as its Rep of the Year for 2006. Its Top Five Distributors in the petroleum marketing market include Source North America Corp., Addison, IL; Northwest Pump & Equipment Company, Portland, OR; John W. Kennedy Company Petroleum & Industrial Equipment, East Providence, RI; ANS Distributing, Tucson, AZ; and Commercial Petroleum Equipment, Sun Valley, CA. The company named two PEI members as its outstanding international petroleum marketing distributors: Reconstructora Nacional de Bombas, S.A. de C.V., Monterrey, N.L., Mexico, and Grupo Petro Gas de Monterrey, S.A. de C.V., Monterrey, N.L., Mexico.

Ryko Manufacturing, Grimes, Iowa, has announced the appointment of Tom Carleton to the position of chief executive officer. Carleton has worked with Ryko for over 30 years, most recently as executive vice president.

YOUNG DISTRIBUTION PROFESSIONALS CONFERENCE
If you are a young professional involved in the equipment distribution side of our industry, you should give serious consideration to attending the Young Distribution Professionals Conference, August 5-8, 2007, at the Eaglewood Resort & Spa in Itasca, Illinois.

The conference is sponsored by the Association Education Alliance, a federation representing over 40 distributor-related trade associations, including PEI.

The educational sessions, taught by an outstanding faculty, will include distribution issues such as sales, marketing, operations and making a profit. This conference provides the attendee with a unique opportunity to meet with and learn from distributors working in noncompetitive commodity lines. For more information, call PEI: 918-494-9696.

NORTH AMERICAN PETROLEUM MARKETING BRIEFS
Alchemist USA LLC, an India-based company with US headquarters in Gurnee, Illinois, has purchased 17 convenience stores from Veach Oil, Vienna, Illinois. Veach will continue to operate as a gasoline wholesaler in the region.
Getty Realty Corp., Jericho, New York, has acquired 11 Aloha Petroleum gas stations in Hawaii and a limited leasehold interest in seven other Aloha stations from GE Capital Solutions. The deal was part of a Getty/GE Capital transaction involving 59 convenience store and station properties in nine states.

PEI’S ELECTRICAL CONTINUITY RP REAFFIRMED
Members of the PEI Electrical Continuity Testing Committee, responsible for publishing Recommended Procedure for Testing Electrical Continuity of Fuel-Dispensing Hanging Hardware (PEI/RP400), have voted to reaffirm the recommended practice under the same name that was first published in 2002. This means that if you own and follow the 2002 edition of RP400, you can continue to do so knowing that the industry and Electrical Continuity Testing Committee have reviewed the document and find no reason to change it. All PEI Recommended Practices are available for purchase at www.pei.org/RP400.

ETHANOL NEWS
“I will tell you the future of biofuels is not based on corn,” US Deputy Energy Secretary Clay Sell said last month. Sell said the future of biofuels is cellulosic ethanol. “We are going to get significant breakthroughs that can conceivably bring down the cost of cellulosic ethanol production down by an order of magnitude,” he said.
Brazil’s state-run oil company Petrobras is studying the construction of additional ethanol-only pipelines in Brazil, downstream director Roberto Costa told Dow Jones Newswires April 4.

DEATHS
James “Sam” Harris, president and owner of Harris Service and Equipment Company, Byron, Georgia, passed away March 24 after a long battle with cancer. He was 50. Survivors include his wife, Janis; three children (Courtney, James and John); and his parents, S.J. and Marie. 

MEMBERSHIP APPLICATIONS
Fuel filtration system manufacturer. Ultrapure Division of Clinton Power, 611 Landwehr Road, Northbrook, Illinois 60062, has applied for manufacturer division membership. Bruce M. Benjamin is CEO of the firm, which was established in 1910. Ultrapure manufactures an automatic fuel maintenance system which continuously monitors the fuel supply. The system is sold through distributors. Nominated for PEI membership by Bob J. Hill, FranHill, Tulare, CA.
Tire inflator manufacturer. Instrument Research Associates Pvt. Ltd., Subhavan, PB No. 10013, Plot No. 73F, Electronics City, Hosur Road, Bangalore, India 560100, has applied for manufacturer division membership. Sheela Nagaraj is managing director for the firm, which was established in 1977. The company manufactures digital automatic tire inflators and retail visual identity elements which are sold through distributors. Nominated for PEI membership by Arup Chatterjee, Midco, Mumbai, India.
Sign manufacturer. Pattison Sign Group, 1868 Sources Boulevard, Pointe-Claire, Quebec H9R 5R2, has applied for affiliate division membership. Johnny Russo is marketing and communication coordinator for the firm, which was established in 1904. Pattison Sign Group designs, manufactures, markets and sells signs. Nominated for PEI membership by David Cescon, NovycElec, Dorval, Quebec.

ADMITTED TO PEI

• J.A.M. Equipment Sales & Service, Houston, TX (dis)
• Rush Petroleum, L.L.C., Litchfield Park, AZ (aff)
• JFTA Pty. Ltd., Campbelltown, NSW, Australia (aff)
• American Equipment Finance, Warren, NJ (aff)
• JRC Maintenance, San Marcos, TX (aff)
• Scot C. Thrash, Vanguard Car Rental, Tulsa, OK (O&E)
• Peter J. Hopley, BJ’s Wholesale Club, Inc., Natick, MA (O&E)
• Linda Dauphinee, BJ’s Wholesale Club, Inc., Natick, MA (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.