Becoming a Biodealer

Change is a constant, goes the old saying, and Windsor Fuel Co. is an example. The family-owned enterprise began delivering ice and coal in the late 1930s. When the ice and coal businesses dwindled, and fuel oil grew increasingly popular, the business changed with the times, becoming a fuel oil dealer. Now the company is changing again, venturing into biodiesel in a big way.

Last fall the dealer began delivering B5 ‘ a blend of five percent biodiesel and 95 percent fuel oil ‘ to all of its customers.

‘I’m glad we did it,” said Donald (‘D.J.”) LeoGrande Jr., a principal in the business based in Mineola, N.Y. The structure of its fuel oil business seems to have helped make Windsor Fuel’s move into biodiesel somewhat easier.

The company operates a dozen or so fuel oil delivery trucks, and two transport trucks that pick up product for a 125,000-gallon bulk tank on the company’s site.

‘We’ve always felt that it was very important to have that,” LeoGrande said, referring to the bulk tank, ‘for the sense of control over the supply of the product.”

‘That’s relatively small as far as storage tanks go,” LeoGrande said, ‘but because we have our own transport trucks, we can supply that tank all day long. It’s feasible that we could turn that over in a day.”

Having the bulk tank has another benefit too. ‘Because we have a very convenient location in Nassau County, some other companies will come here to load,” LeoGrande said. ‘We’ll bring their oil here, store it in our tank and they’ll come and use their retail trucks to pull it out and distribute it to their customers. It’s a throughput arrangement.

‘We make some money on the transport end of it ‘ bringing the product in ‘ and as the retail trucks pull it out we charge a throughput fee,” LeoGrande said. ‘It’s a small amount, but anything we can do to add to the income stream is always good.”

That desire to be in control and regulate inventory led the company to purchase the transport trucks instead of hiring and relying on an outside carrier, LeoGrande said. ‘You’re always a little bit vulnerable to whatever’s happening with an outside carrier,” LeoGrande pointed out. ‘Are they busy? Did they have a truck break down? Did a driver not come in?” If any or all of those things happen, LeoGrande said, ‘We’re sitting here waiting for delivery.”

Leaving those crucial aspects of the business in somebody else’s hands just didn’t sit well with LeoGrande or his father, Donald Sr. and uncle, Joseph LeoGrande Jr., who manage the family business together.

‘We really want to be involved and control pretty much every aspect of the business,” LeoGrande said. ‘We feel that gives us the best ability to serve our customers. It’s been a theme with the company all along.”

The transport trucks pick up fuel oil from large terminals on the south shore of Long Island, about 15 miles from Windsor Fuel’s base. ‘The terminals there are fed by the Buckeye pipeline, and they’re also fed by barge, so the supply is very reliable,” LeoGrande said. That the terminals are relatively close provides another benefit: lower mileage on the transport trucks.

‘We take real good care of them because they’re a very big investment,” LeoGrande said. The tractors each carry a price tag of more than $100,000. ‘They fall into the category of heavy haulers. They’re a little bit more heavy-duty, and higher-powered, than most.”

Likewise with the tank trailers, which were spec’d with three rear axles to support more weight. ‘We had them purpose-built,” LeoGrande said. ‘When you’re hauling fuel oil typically you just have one big compartment” inside the tank, because only one fuel is being carried, he noted. Gasoline trailer tanks, on the other hand, usually have five different compartments to hold various grades of fuel. LeoGrande said Windsor Fuel spec’d the all-aluminum tanks with three compartments so that if an accident should happen, and result in a rupture, a spill would be limited to the amount in the compartment, as opposed to the entire contents of the tank.

On the service side of the business, Windsor Fuel is diversified, doing all things HVAC. It ventured into air conditioning some fifteen years ago, for instance. ‘A large number of our customers have central air conditioning, and they rely on us for that,” LeoGrande said. The company’s field personnel include ten service technicians and two or three installers, each of whom specialize in air conditioning or heating, so the company has the expertise to install fuel oil tanks, oil-fired boilers and more elaborate systems such as the aforementioned central air systems, and radiant heat systems too.

‘We’ve been here so long most of the relationships we have with our customers go back years and years, so they’re very comfortable calling on us,” LeoGrande said. ‘They know us well.”

Those long-term relationships were helpful to Windsor Fuel once it decided to become a ‘biodealer,” and the time came to introducing biodiesel to the customers.

‘We’d been watching biodiesel for quite a while, trying to figure out the mechanics behind it ‘ its compatibility with the equipment, how it would affect the operational end of things,” LeoGrande said. The more they learned, the better it looked, LeoGrande said. ‘It appears to be the future of our industry,” he said. ‘It has so many benefits.”

The company made its move in the fall of 2011, contacting Ultra Green Energy Services LLC, a supplier based in Chicago, Ill., and receiving guidance and support from Michael Devine of Earth Energy Alliance, a consultant in Westport, Conn. Devine is also a former fuel oil dealer.

‘He told us about his experience in being a retailer and how he did with biofuel, how it was great for his business,” LeoGrande said.

After that, LeoGrande recalled, he and his father and uncle decided, ‘Let’s not just try it out. Let’s just jump in with both feet. And that’s pretty much what we did. Starting January 1, 2012, all of our customers got a five percent blend of biofuel.” The change was not presented as an option, a tryout or a phasing in, LeoGrande said.

‘The first-of-the-year date was important,” he added, ‘because of the New York state tax credit.”

Customers in the state are entitled to a per-gallon rebate of one cent for each one percent of biodiesel blended in their fuel oil. ‘So, if they’re buying five percent Bioheat, they get a five cent per gallon tax credit from New York state on all the gallons they purchase for the year,” LeoGrande said.

The company’s managers had foreseen that keeping track of which customers received B5 deliveries, and which received regular fuel oil deliveries could have become a complicated task. Also, some customers might receive a delivery or two of regular fuel oil and subsequent deliveries of B5, further complicating matters.

‘We decided it would be so much easier if every single gallon that we sold, starting January 1, was B5,” LeoGrande said, and that was how it was handled. ‘Everything they bought in 2012 was B5, and they qualify for the tax credit of five cents per gallon,” he said.

‘I’m glad we jumped in,” LeoGrande said. ‘It turns out that it really wasn’t that difficult. We thought handling the product would be so much different, and it really wasn’t. The main thing was establishing a relationship with the supplier which was UltraGreen.”

To get the word out to customers, Windsor Fuel sent out mailing and posted announcements on its website.

‘They’re reaction was very positive,” LeoGrande said. ‘Once they learned about the benefits and the cost savings I’m sure that helped them to accept the product.

‘It’s cleaner, better for the environment, better for the United States as a whole because it’s a domestically produced product, it’s a renewable product and, by the way, you’re going to save some money. How can you argue?”

A few customers worried about the compatibility of the biodiesel with their equipment. ‘Once they were assured that the transition would be seamless, that there was nothing to be done ‘ they were on board,” LeoGrande said.

Now Windsor Fuel is planning to add bulk storage exclusively for biodiesel.

‘We’re in the process right now of trying to add a B100 tank to our facilities so we can do the blending at different ratios at the rack,” LeoGrande reported. ‘Right now when we blend in the tank, it’s five percent, and we can’t adjust that up or down.”

Adding a dedicated biodiesel storage tank will enable Windsor Fuel to blend at the rack. ‘We can adjust that ratio from five percent all the way up to 20 percent,” LeoGrande said. ‘We’re going to give that higher percentage to our customers because we feel it’s a better product and they would want that because it’s also a cleaner product, and the higher the percentage, the higher the tax credit they get. For B20, they’ll get [a tax credit] of twenty cents per gallon. That’s one of the driving forces.”

Windsor Fuel also will be able to offer the higher blend to its throughput customers, LeoGrande noted.

‘Different throughput customers might request different blend levels ‘ B5 or B10,” LeoGrande said. ‘We want be able to supply from five percent all the way to 20 percent.”

The new tank for the biodiesel is probably going to be sized at 30,000 gallons, LeoGrande said. Placement ‘ under or above ground ‘ is still being weighed by the engineers on the project.

‘If the tank is going to be aboveground, it will need to be heated and insulated,” LeoGrande said. ‘When the bioproduct is at a full concentration, it tends to get thicker and gel up as the temperature decreases. That’s the concern.”

An advantage of underground storage is that the temperature would be constant at roughly 55 degrees, and so would not require insulation, LeoGrande said.

‘We’re weighing the pros and cons,” he said. ‘We’re hoping to get this work done during the summer and be ready to go by September or October, for the start of the heating season.”

Under a mandate by New York state, all heating oil must be ultra-low sulfur starting July 1. ‘It’s going to have the same sulfur content as ultra-low sulfur diesel fuel for on-road trucks,” LeoGrande said. That means a change from roughly 3,000 parts per million (ppm) ‘all the way down to 15 ppm,” he noted.

‘The new number two oil is going to be very, very low-sulfur content, and when we blend that with biofuel, we’ll actually have a product that will burn cleaner than natural gas,” LeoGrande said.