Managing Fuel in Bulk Storage

Drilling for oil or gas on the Marcellus Shale in northeastern Pennsylvania often goes on around the clock. To keep trucks and other heavy equipment running day and night, some of the companies operating there maintain bulk storage tanks holding as much as 7,000 gallons of diesel fuel. But the tanks, exposed to the elements, are prime candidates to develop moisture, which can lead to corrosion and sludge. And that is a potential business opportunity, believes Mike Hinds of Hinds Oil Co., a fuel oil dealer in the area. His company aims to market a corrosion- and sludge-fighting treatment to companies with bulk storage facilities in the region. If you are in search of a good storage space, you can read it here.

Hinds won’t have to go far to call on his potential customers.

‘Well over a hundred wells have been drilled within 20 miles of my office,” said Hinds, who is vice president of the family-run company in Montrose, Pa. ‘We’re right in the middle of it.”

The treatment that Hinds Oil intends to market is one that the dealer has been adding to its heating oil for the past two heating seasons. Called Fuel Right, it is designed to prevent corrosion and sludge by keeping troublesome microorganisms in solution.

Whether Hinds or other dealers seek to market the additive to treat fuel in bulk storage facilities or in the 275-gallon tanks of residential customers, the sales pitch, and the benefits to fuel storage and dealers, are the same, said Bob Tatnall, founder of Fairville Products, the company that makes Fuel Right, and Dries van Wagenberg, owner of The Solutions Team, the U.S. distributor of the additive.

Dealers can treat their own tanks as well as customers’ tanks. Continuous, low-level treatment of fuel oil in bulk storage largely controls sludge issues, including tank corrosion, while “shock” treating of individual customers’ tanks once a year achieves similar results, van Wagenberg said.

Many fuel oil dealers are loath to use an additive because they see it as adding to their per-gallon price; they view that as something to be avoided because competition among dealers is so keen. But, van Wagenberg said, ‘Treating with the right product is not a cost. It’s a value-add that can generate revenue.”

While, as van Wagenberg noted, the cost of bulk treatment ‘is necessarily born by the dealer,” he and Tatnall suggested that dealers market the treatment to customers as something distinct from the heating oil, tout its benefits for storage tanks and systems, and so persuade customers that it is worth it. And van Wagenberg described ways to pass the cost of shock treatment of customers’ tanks directly to customers, with a margin for the dealer.

One way to do this is to develop a ‘treatment with every tune-up” program, which van Wagenberg said was implemented by a Maryland dealer and resulted in a reduction in service calls. Subsequently the dealer began bulk treatment of its fuel, and the volume of service calls dropped further, enabling the dealer, through attrition, to reduce service staff.

Direct revenues from the ‘treatment with every tune-up” program became an important earnings factor for the dealer’s service department, van Wagenberg said. Implementing the plan was simple: the dealer added the treatment to each customer’s tank as an automatic part of every annual service – no questions asked. The dealer then added to each customer’s monthly statement an amount equal to twice its cost for the product.

If a customer called to inquire what the charge was for, the front office staff was trained to respond that the charge was for “a tank treatment that is now a part of our annual service program.”

Very few customers called to question the added charge, and of those that did, nearly all were satisfied with that answer, van Wagenberg reported. A minority of customers who said they did not ask for the treatment and did not want to pay for it were told that the charge would be removed from their bill and they would be marked for “no treatment” in future. The dealer continued to treat those customers’ tanks, without charging for it, van Wagenberg said. (An alternative approach would be to increase the annual fee for service contracts by, say, $20, while playing up the fact that tank treatment is now included, van Wagenberg said.)

Another option is to launch a voluntary tank treatment program, van Wagenberg said. A dealer in New England has conducted such a program for a decade or so and is now generating more than $300,000 in annual gross revenues with ‘a very good margin,” according to van Wagenberg. The program has an added benefit of providing work for some employees in the off-season.

The dealer introduced the program with a letter to customers announcing a “premium tank treatment,” consisting of a small dose of Fuel Right and a larger amount of an inexpensive additive. The cost to the customer, initially $39.95, now is $60.

Customer response to this voluntary program started out strong and grew stronger, van Wagenberg said. Customers were advised by the dealer to “call our office if you would like to be put on the list.” More than 4,000 did in the first season and today some 6,000 customers take the treatment each year, van Wagenberg said. In addition to the revenue generated, the program helps reduce service calls during the heating season, van Wagenberg said.

Results of a corrosion study, showing the efficacy of Fuel Right, have been highlighted by Fairville Products, its manufacturer, and additional information on tests is available at the company’s Web site, www.fuelright.com.

In Recovery

Mike Hinds sees another possible revenue stream for his family-run company, Hinds Oil Co., Montrose, Pa., and that would be in serving as a dealer of SWR, a degreaser that has long been used in the maritime industry and now is being launched to the fuel oil trade.

Billed as non-toxic and non-hazardous, SWR is a cleaning product designed to enable recovery of hydrocarbon fuel from impurities or water. Its uses include cleaning tanks, autos and containers, as well as ‘soil washing,” according to the manufacturer, SWR Corp., Portland, Ore.

Hinds learned about the product at an introductory session in March at the Dupont Country Club in Wilmington, Del. The meeting was sponsored in part by The Solutions Team, a marketing company, to show fuel oil dealers how they could become dealers of SWR, Fuel Right or both.

Hinds said of SWR, ‘It looks like it’s a product that has a multitude of applications that could be beneficial to a lot of people.” Besides being biodegradable, non-toxic and suitable for cleanup of spills, Hinds noted, ‘It has a lot of cleaning capabilities. We could use it for cleaning the outside of fuel oil trucks so they look better.”

‘There’s a lot of pressure on fuel oil dealers to look sharp – uniforms, clean vehicles, keeping the customers’ tanks clean,” said Dries van Wagenberg, owner of The Solutions Team. The pressure comes from a perception that oil is ‘dirty,” van Wagenberg observed. ‘There are plenty of oil dealers who have not done the job that they could have done to prevent that image,” he added. That is why fuel industry leaders are telling dealers their operations must look ‘as sharp and as clean and as neat as the competition that is distributing natural gas or propane gas,” van Wagenberg said.

And then there is the clean-up and recovery application. ‘If we end up having a minor spill at a customer’s location it looks like it would help in that cleanup process,” Hinds said.

‘There are a couple of environmental cleanup companies in our general area,” Hinds remarked. ‘I plan on approaching those folks and seeing if it’s something that they could use.”

SWR is activated by mixture with fresh or salt water, and will remain effective for 30-45 days before biodegrading, according to the manufacturer. In this time frame the mixture may be used repeatedly.

As a de-emulsifying agent it is designed to improve the performance of oily water separators. It helps disposable filters last longer, while reusable filters can be cleaned in a vat of SWR and water which the manufacturer said precludes the need to use acid baths.

As a chemical that separates oil and water, SWR remains in the water, said Paul Rosenbaum the chief executive officer of SWR Corp., Portland, Ore.

‘Therefore when you separate the oil and water you can reuse the water again and again and again to separate out more and more oil,” Rosenbaum said. With each reuse, Rosenbaum noted, the product becomes more cost efficient.

The number of times the water can be reused depends on the application. ‘That’s something that we’re learning [about] every day,” Rosenbaum said. In addition, he pointed out, the recovered oil can be used.

Dries van Wagenberg explained how SWR and Fuel Right could complement each other. He noted that in Pennsylvania, for example, bulk storage tanks are subject to state inspection at five-year intervals. Once the tank has been ‘de-inventoried,” van Wagenberg said, SWR could be used to clean the sludge from the tank. Then the fuel could be treated with Fuel Right before being loaded into the tank, he said, to help prevent sludge from growing again.