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By Claire Pamplin - 12/15/2003
A few years ago, if convenience store-petroleum marketers discussed underground storage tanks and the fuel inside them, the conversation probably focused on leak detection, tank and equipment upgrades and the push to meet new federal UST standards for a 1998 deadline. Some unlucky operators faced soil and groundwater contamination from leaking tanks, and more than a few smaller operators closed shop and sought alternatives to a career in gasoline marketing. The costs of tank replacement and soil remediation were too great for some.

For the many survivors — there are 168,000 retail gasoline outlets in the United States, according to the Energy Information Administration — underground storage tanks today represent not as much a threat to the natural environment since they have been improved and upgraded. They do, however, threaten a business's balance sheet. The key issue in tanks is in the tanks — costly fuel inside them. The challenge of managing petroleum inventory for many is carrying costs and cash flow, according to more than one industry expert, including Dwight McKnight, chief technology officer and a founder of CMi Solutions Inc., based in Charlotte, N.C.

That challenge exerts a huge influence on the petroleum marketing business, McKnight said. "Everybody says gasoline is not what it used to be, but gas prices still drive the business." He said when gasoline prices are relatively low, say 79 cents per gallon, an operator with 15,000 gallons stored underground has just under $12,000 worth of inventory to worry about. But if the price shoots up to $1.70 per gallon, the operator is now sitting on top of more than $25,000 of product under the ground. Multiply that by 10 for a small operator with 10 stores, and "that's a pile of money," McKnight said.

"This is a big deal. It puts more pressure on making money inside the store," he said. It also creates a high level of incentive to manage fuel inventory closely, and fortunately, data collection and management tools allow operators to use a unified system to keep close tabs on compliance, conduct fuel loss reduction, manage product transportation issues, and to stay at desired in-stock levels, which sometimes means maintaining half of a 10,000-gallon tank, rather than a full tank, when gasoline prices are high.

Marketers are very concerned about regulation compliance, said Dean Cheramie, director of marketing strategy, Gilbarco Veeder-Root, Greensboro, N.C. Staying in compliance has a number of other benefits, he said. Because of the integration of fuel management activity, "you run out of fuel less often." The Environmental Protection Agency requires a gas marketer to determine at least every 30 days whether or not the tank and piping are leaking by using proper release detection methods.

An operator's release detection method must be able to detect a release from any portion of the tank and connected underground piping that routinely contains product.

Automated data collection eliminates the manager's manual collection of fuel data at the site, which frees up store personnel to focus on customers or other in-store matters, he said. Automation helps reduce transportation costs because tank wagon drivers can validate inventory levels up the minute as they determine where to take fuel.

This need for more than one or two people to access fuel inventory data is exactly why Dallas-based Alon USA is currently developing a software program to bring all fuel information together, said Avsha Klachuk, director of the marketing technology group.

Currently the company, which operates 170-plus Southwest Convenience Stores, is working very closely with Retalix, Klachuk said, in order to create a system in which Environmental Protection Agency representatives can obtain the information they might need, and the accounting department can supply the company's general ledger with the appropriate information, while the fuel manager can easily access the data he needs.

One repository of information will create an invaluable efficiency for the company that operates its own stores using mostly INCON tank gauging systems, but supplies Fina distributors who use a total of four or five systems, he said. "It became complicated when different users tried to dial into the system to get information."

A wide area network will replace telephone lines so user may get information in real time, a "push versus pull" environment, Avsha said.

"We are looking for more accurate data. If the fuel manager says we lost 3,000 gallons, I'll be able to tell him when, where and why. Most of the times discrepancies are due simply to inaccurate information. But if you have water in the tank, you want to know now, before it gets into diesel engines," he said, explaining that diesel fuel readily absorbs water particles from the air, which can create problems. The new system will help identify any problems with the misreporting of fuel delivery amounts, too, he said.

Developing or purchasing a solution that can work across different tank gauging systems and different back-office and POS programs is a primary customer concern, said Jimmy Frangis, senior director of sales for petroleum, convenience and grocery segment, at Atlanta-based Radiant Systems Inc. "When customers come to us and talk about our solutions they want to make sure we can handle the basics. They want to make sure our systems can interface with their tank monitoring systems, for example. They are concerned with effectively capturing detailed information around fuel sales. They want to know how we handle stick readings and to make sure we are capturing all the right data. They may be using our back office system or someone else's."

A current "hot button" in fuel inventory — managing it down to the store level, he said. "We offer detailed data, mostly sales and inventory level type information, such as the number of transactions and volume by time of day; what's selling, when it 's selling, how much is selling."

Radiant's products give constant updates on inventory levels in the ground, and reconcile constantly with purchases to make sure operators don't have a leak or drive-off problems, he said. It all amounts to leak detection through detailed data.

He added the programs are designed so that the system is intuitive. Some user training is involved, but learning to use them is not a significant obstacle.

Information Innovation

Much information management has moved from telephone lines to networks or the Internet. Many programs, including Gasboy's Infinity provide Web-based interfacing with fuel inventory reports. The Gasboy product notifies users by e-mail, page or fax when events previously identified as important do occur.

Information transmission is not restricted to wires or even fiber optic cables, either. Wirelessness is a part of the scene in fuel inventory management. Using direct sequence spread spectrum radio technology, Centeron Products, for example, allows fuel data to transmit to a receiver on the site, said David L. Cahill, director, Robertshaw Industrial Products Co., based in Maryville, Tenn. The devices are battery powered, with no wires used for power or communication, he said.

The radio technology is good for low power, long-range situations, and to avoiding jamming from other devices.

The product's options include installation into a phone system so that data is transmitted to a data center, where an operator can get tank information via the Internet, and send text messages, or messages to a user's cell phone. The company also has software package to install in local PCs if users don't want use the Internet, Cahill said. Another software package allows use for remote sites.

The system works in underground tanks, or above ground tanks up to 50 feet high, and can handle hundreds or even thousands of tanks.

The Internet application allows a hierarchy of users so the customer can control user access to tank information. For example, store managers might be permitted to see just their own tanks, while jobbers might need to see information on all the tanks they supply, Cahill explained.

Bringing data and fuel management together in a single system that helps sites run more efficiently is the goal of most retailers. Veeder-Root's Cheramie said, "Marketers are looking for increasing rationalization and reach of automation systems across their stores. They are thinking about the whole forecourt operation."

CMi Solutions' McKnight said attitudes toward fuel management and underground storage tanks had changed in recent decades. "My personal sense is that, back in the 70s and 80s, people had a don't see, don't care attitude." But now, most industry operators are diligent about compliance and good management. "We're doing a good job," he said.