The State of the Industry is timed for the New Year. It provides an opportunity to take a look back at the state of business during the previous year while also taking a look forward at what can be expected in 2012.
To get this critical insight, we interviewed the member leaders (the newly elected presidents and chairmen) from the key associations serving the industry. We asked them for feedback on their business operations as well as their perspectives on what's to expect from the associations in the coming year.
Generally, our industry has been holding its own in the recent recession and anemic recovery. More than one of these leaders noted that the industry is recession resistant. That is true, but only in generalities. Specific operations have very much felt the recession and, of course, the grinding on of high fuel process for reasons more often than not unrelated to traditional supply and demand metrics.
Our mix of leaders includes three notable integrated petroleum marketers, an executive at a large travel plaza operation and an executive at a large terminal/supply operation. They respectively head the National Association of Convenience Stores, Petroleum Marketers Association of America, Society of Independent Gasoline Marketers of America, NATSO and the International Liquid Terminal Association. We basically get a broad perspective on what’s happening in the industry from rack to retail.
ILTA represents 86 companies and partnerships that operate bulk liquid storage terminals in 47 countries. These facilities are located in ports and along rivers, canals and pipelines. They serve the vital economic purpose of transferring liquid products from one transportation mode to another. Products handled by its members include crude oil, petroleum products and a wide variety of chemicals, as well as ethanol, biodiesel, vegetable oils, molasses and fertilizers.
ILTA’s mission is to provide its members with essential informational tools to facilitate regulatory compliance and improve operations, safety and environmental performance; offer opportunities for relationship building, networking and knowledge sharing; and represent the bulk liquid terminal industry before Congress and government agencies.
ILTA’s 2012 chairman is Michael J. Burgett, vice president, strategic sourcing at NuStar Energy L.P. NuStar Energy L.P.'s asphalt refineries, refined product terminals, petroleum and specialty liquids storage and terminaling operations, and crude oil storage tank facilities are predominantly located on waterways that are easily accessible by barge or vessel. Altogether, these facilities have over 94 million barrels of storage capacity. NuStar Energy L.P.'s crude oil and refined products pipeline systems largely serve growing markets in the Mid-Continent, Southwest and Texas-Mexico border region of the United States.
NPN: How was business in 2012?
Burgett: The logistics business in general and the storage business as an adjunct of that has been pretty steady. It's nice to be in a part of the supply chain that is very much a demand/pull kind of business. We provide readability for petroleum and chemicals and the other types of products that we store is an industry. There is still a lot of capital being spent in the industry and a lot of purchasing and acquisitions going on and I think we see a lot of optimism with some of the oil shale plays going on around the United States.
The economy is growing very modestly – one or two percent depending on who you believe –
and the terminal business is somewhat recession proof, although not entirely. There's been a tremendous growth in new storage, particularly on the water, and we're gaining some international members who have a lot more interest in the U.S. market than in years past. And that's actually organic growth for our members rather than buying other companies and stacking existing assets together.
NPN: What issues will ILTA be keeping a watch on in 2012?
Burgett: There are probably three major focuses for ILTA going into 2012. The first issue that catches our attention is the flood of new regulations. We really have seen, during the current administration in particular, but a trend generally across states and local governments, is that regulations are coming faster and they are more prescriptive in nature. From our perspective we want to keep our membership informed and educate the regulators and legislators on how these regulations impact the terminal industry and its customers.
ILTA's primary interests are around OSHA's general duty standards—operators need to be very aware about how that is being applied and need to be on their best as far as their operations and regulatory compliance. There's been a lot of concern around the E15 mandate for ethanol and that is something we've watched closely and it does have a material impact on our membership.
You have CFATS (Chemical Facilities Anti-Terrorism Standards), which is something we spent a lot of time on over the past several years and something we're going to continue to focus on to see how the Department of Homeland Security deals with that regulation. It does have some pretty tough conditions, many of which would affect our smaller members, which would then unfortunately be passed along to our customers and ultimately consumers.
CFATS has some risk-based analysis and as an industry, we would like to know more about that. We're a bit more concerned now than in the past with the mechanics, about how risk is assessed in these different regulation-making organizations, mainly because we want to understand the science, if there is any, and the concerns, if there are concerns, as opposed to going on hearsay or having a knee-jerk reaction to specific events instead of good solid science.
NPN: There have been a number of non-traditional investors in the terminal industry in recent years. What impact are they having?
Burgett: It's an interesting development in that it is two edged. When an outside investor that is not keen on running a terminal operation wants to invest in it for purposes of economic growth – whether it's flipping it or staying on as a silent financer type of arrangement – that tells you that there is value in the business. I think that is a very positive thing and to the extent that they might add value or best practice and discipline us a little bit better—I think we welcome that. The flipside, I think it creates a lot of uncertainty in the market. Our customers like the stability of the operators and like to have a deep relationship that gives them a lot of comfort that their products are being handled safely and efficiently and having new owners might sometimes spook the customer on occasion. But I think the larger picture is that when investors come in, and they are generally pretty smart folk, and they see value, I think it opens our eyes to look again on our operations and make sure that we are extracting the right amount of value for our shareholders.
NPN: Is there any personal mark you would like to leave with your term?
Burgett: We have a chairman's plan that we go through every year and ILTA is a wonderful organization in the sense that it is stable and is run by folks that have moved through secession to the role I'm filling today, so we've had a chance to be seasoned. I've actually been on the board twice and served over 10 years with ILTA so I think I have a pretty good sense for it. I think 2012, particularly around the economy and the elections, is going to be a year of great uncertainty, so if there is any mark that I would like to leave on ILTA for my last year on the board it would be to steady the helm. We are a growing, very stable very successful organization and industry and we want to convey a sense of confidence and calm. We’re not going to get excited and chase the next shiny thing. We’re going to hold the course and let the storm pass over us.
NACS was founded August 14, 1961, as the National Association of Convenience Stores. It is an international trade association representing more than 2,100 retail and 1,600 supplier company members. NACS member companies do business in nearly 50 countries worldwide, with the majority of members based in the United States. NACS serves the convenience and petroleum retailing industry by providing industry knowledge, connections and advocacy to ensure the competitive viability of its members' businesses.
NACS 2012 chairman is Tom Robinson, president of Robinson Oil Corporation based in Watsonville, Calif. Robinson Oil Corporation is an integrated operation that includes 35 Rotten Robbie convenience store/fueling stations and a strong commercial fueling operation serving the Pacific Northwest.
NPN: How was business in 2011?
Robinson: I've certainly appreciated being in a recession-resistant industry the last few years. I would be happy to see our business doing better, but as I look at a lot of industries I'm more than reasonably happy and the cup has been more than half-full. It's been an interesting year. I certainly thought that economically we would see more progress during the year, and if anything there were more concerns as the year went on as opposed to optimism.
What has also been interesting is how high crude oil and fuel prices have stayed. I very much remember the run-up in 2008 and then how it fell off. That seemed to me to be more obvious in about how high prices were, but I think, on average, crude oil and products have likely been higher this year. This is amazing to me when you’re in the midst of a very slow recovery. A lot of that is likely related to the Arab Spring, which certainly had a significant influence. But it's been very surprising to me how strong it’s been with demand in general being flat, at best.
NPN: Your business is California-based, which is at the epicenter of a lot of the worst legislative and regulatory initiatives impacting business – particularly those involved with fossil fuels. How do you deal with that?
Robinson: Were more fortunate than some people in California by being based in the San Francisco Bay Area and in general Silicon Valley has been doing better, certainly compared to the Central Valley or the Inland Empire and Southern California. So our economy, while not great, has certainly been stronger than in other parts of the state. But California is an amazingly dysfunctional state; it has a wealth of riches that it squanders.
NPN: What do you expect from 2012?
Robinson: I'm almost always optimistic even when I'm proven wrong. I think that 2012 is going to be a fascinating year partly because of the election, and I'm really interested to see how that sorts out. I think it's going to really be important. I think that my market, the Bay Area, will probably marginally get better so I feel comfortable at least from my own company’s standpoint. I look at the greater economies of California and the United States and internationally and there are a lot more question marks out there. So I don't know. As I said I tend to normally be optimistic, maybe delusionally so, but I certainly don't see next the year being gangbusters. I would be more than satisfied if we could make incremental progress rather than slipping back into a double dip or some type of financial chaos that could occur with some of the things going on in Europe. So, the answer is a resounding, “I don't know.”
NPN: What is at the top of the docket for NACS in 2012?
Robinson: Government relations are always a big deal. And I think there is a lot going on in the legislative and even more so the regulatory areas. With swipe fees, obviously we would like to protect what we have gotten so far and we are trying to fix the debit situation with the Fed where they did not set the rates correctly. We have an ongoing lawsuit, that's one of those legal things; it just goes on and on. So swipe fees, while not to the same magnitude as last year, continue to be very important.
You have big regulatory FDA issues both with menu labeling and tobacco. Being a Californian I’m much more spooked typically about regulatory issues than legislative issues. With legislative issues you have an opportunity to fight and marshal resources and get grassroots going to make your voice heard. Regulatory issues are very challenging where the regulator typically calls a hearing and says what it's going to do, then takes some public comment, which often doesn't matter. And then they end up doing what they said they were going to do in the first place. Dealing with regulatory agencies is challenging. On a more positive note, NACS continues to enhance its offerings around food service. NACS Café is a resource for convenience retailers to receive education, ideas, information and solutions designed to help build dynamic, effective, and profitable foodservice, which is a very important store category. We also continue to have a strong legislative agenda with fuels issues.
The exciting thing that's really happened over the last year or so is grassroots, and we had a great issue (swipe fees) and it's always easier to do grassroots when you have a great issue that everybody can understand, feel strongly about and get behind. But I think that this is a real opportunity for NACS. A lot of industries and a lot of organizations would die for the grassroots coverage we have. We basically have stores in every congressional district. So the challenge for us is to continue to do a good job and improve on our ability to mobilize those assets.
We also concentrate on putting together a decent show and other educational opportunities. I've previously never had much involvement with either the NACS Show or NACSTech, so it's fun for me and an opportunity to get behind the stage a bit and see how that is done.
I would be remiss if I did not mention PCI. There are more potential expenses facing retailers in the next few years and trying to get that right. My expectation is that it may never be over and that it will always be evolving so I think what you need to do is be very careful in selecting your solutions so from the start you have a good solution that works pretty well and that is somewhat reasonably priced recognizing full well that that initial solution is probably not going to be it, but that you've not wasted a lot of money in the process.
Headquartered just outside Washington, D.C., NATSO is a national trade association representing travel plaza and truckstop owners and operators. NATSO represents 1,202 travel plazas and truckstops nationwide, owned by 229 corporate entities, and pursues a clear mission: to advance the success of truckstop and travel plaza members.
Since 1960, NATSO has dedicated itself to the needs of truckstops, travel plazas and their suppliers by serving as America's official source of information on the diverse industry. NATSO also acts as the voice of the industry on Capitol Hill and at regulatory agencies such as the Environmental Protection Agency, the Department of Transportation, the Department of Labor and the Department of Energy. In addition, NATSO conducts an annual national convention and exposition.
NATSO’s 2012 chairman is Darrin Fitton, the manager of the Gold Truck Stops for Sinclair Oil. Sinclair branded truckstops, also known as, Sinclair Gold Truck Stops, consist of 57 independent truckstops from Iowa to Idaho. Sinclair Gold Truck Stops work together as a network or a “chain” of truckstops. These independent truckstops consist of every kind of truckstop from the large 300+ truck parking spaces with 17 showers on major interstates to the small and quaint four-shower truckstop located on a small rural highway. Fitton is charged with improving and growing the network of independent locations by increasing location count, improving business, and to manage the Sinclair Driver Thank You card; Sinclair’s in house professional driver loyalty card program.
NPN: What do you expect going into 2012?
Fitton: The year 2012 will be exciting for many reasons. The recession seems to be improving; it’s an election year; many issues are on Capitol Hill; and as the new incoming Chairman for NATSO I am truly honored and excited to be involved in this great association. Bobby Berkstressor, the outgoing chairman, has done some amazing things for NATSO; I have some big shoes to fill. I will work hard for the truckstop and travel plaza industry. I am passionate about truckstops; there is a bright future for truckstops. America depends on truckstops and travel plazas to keep it moving.
NPN: What are some of the major issues facing the association?
Fitton: Rest Area Commercialization has been a hot topic for many years now and with states facing huge deficits and looking for means to raise revenue rest area commercialization will likely be front and center again in many areas. Other issues facing NATSO in 2012 are the reauthorization of the highway bill and highway tolling.
NPN: How is the association working to address those issues?
Fitton: Every year in May dozens of truckstop and travel plaza owners storm Capitol Hill side by side with NATSO’s staff and NATSO’s CEO. May of 2012 will be no exception. There will be another storm of truckstop operators anxious to meet elected officials to discuss topics and to voice their concerns about issues that directly affect their businesses. It is quite a sight to see dozens of NATSO members pouring out of a bus in a parking lot near the House and Senate buildings and making their way up the steps eager to voice their concerns. The NATSO staff works tirelessly all year by meeting with elected officials, making statements, raising concerns, and combating issues that directly impact owners and operators in the truckstop and travel plaza industry.
NPN: Do you have a leadership theme or special focus for your term?
Fitton: “Let’s Get Involved!” In my first article I wrote for NATSO’s magazine, StopWatch, I said,
“I believe in NATSO. I believe in its cause. I believe in you. Call NATSO on the phone; someone will pick up the phone and they will be eager to help you. Ask NATSO how you can become involved. You will be amazed with the things you can do. Whether you come from a small town in the middle of nowhere or a large city hidden among the masses of people, you still are important to this cause. Become involved. Raise your hand and ask, “What can I do?” Be involved as if your business and job depends on it, because it does.
My focus as the new Chairman of NATSO is simple: “Let’s Get Involved.” If you are not involved and you do not voice your concern in Washington, you do not have much room to complain. If you are not a member of NATSO, do something good for yourself and become one today! NATSO is an excellent avenue for anyone to become involved with their business and the state and federal governments.
The Petroleum Marketers Association of America (PMAA) is a federation of 48 state and regional trade associations representing approximately 8,000 independent petroleum marketers nationwide. PMAA’s 2012 president is Stanley Roberts, owner of Capitol Oil based out of Jackson, Miss. Capitol Oil is a full jobbership that features convenience stores, wholesale supply, and a small lubricants business. It has been in operation since 1975 when Roberts started out as a consignee with Gulf and then switched to marketing under the BP label when Gulf was bought out. The company has recently rebranded under Valero.
NPN: How was business in 2011?
Roberts: The recession hasn’t had much of an effect on us, but it has had an effect to some degree. The consumption of gasoline is slowly decreasing nationwide and this has had an impact as it has, I’m sure, with all of the marketers in the United States. The mindset has always been if the location was doing “X” number of gallons when you opened it up, if you operated it efficiently and just kept up with the increase in consumption you would see the percentage gain yearly. That is a real change for the marketer. It's not going to happen today and I'm not sure it'll come back in the future. Most likely if you're doing a wonderful job and doing everything you're supposed to, you could even see a decline in your gallons instead of an increase.
NPN: How do you maximize profits in this environment?
Roberts: You have to be very mindful and very careful, and we are not a large marketer. If you are marketing at the retail level, you have to make sure that you are holding and keeping the best locations that you could possibly have. If it is a marginal location, the chances are it's going to decline. And you have to try to squeeze out every bit of profit for the property that you own. For example, if you have a location that needs a larger store, but you don't have that, you are hurting yourself.
We try to make ourselves a service orientated company and will look at any kind of service from wet hosing to cleaning and polishing fuel. If someone's fuel has gotten contaminated with bacterial growth, we have the ability to take care of that, and while it's not a big part of our business, it all adds up at the end of the day. We’ve had people call from out of state, primarily things like cell phone towers where they would put in fuel and the fuel gets contaminated after it sits there and we have to do something with that because you can't just dump it out anymore like some people did when there wasn't so much environmental concern and fuel was cheap.
You also have to market the way people are marketing today, such as through social media. I never thought we would be marketing through FaceBook with such success.
NPN: With the economy as it is, how has your relations changed with your retailer customers?
Roberts: We recently divested from a number of our dealer relationships. None of them were in trouble – none of them were over their terms – but our exposure was more than we liked. We did have somebody that was interested in them and we decided to go that route. I wouldn't have done it five years ago and certainly not 10 years ago, but when product cost $25,000 per load and you're only making pennies on it and if you lose one of those loads, it takes an awful long time to make that up.
NPN: What do you want to accomplish with your term at PMAA?
Roberts: There are a number of priorities that we have, but centrally it appears that there is almost a war between our government and liquid fuels with an effort to drive motorist to use other kinds of energy to drive their automobiles. And some of those I view as not being very cost-effective for the motorist or our country. We already have a tremendous amount of money invested in getting liquid fuels distributed throughout the country and it's been very efficient.
As president of PMAA I would like to represent the association as someone who is mindful of the future and understands that change can be good, but at the same time, are we changing in ways that are not good? I would like to bring to people's attention the idea that we need to slow down and figure out what we already have and augment that with fuels that make the most sense.
NPN: What are some of the specific issues PMAA will be addressing in 2012?
Roberts: We've been totally disappointed with what's happened with interchange fees and we will be doing our part to work on that issue with organizations like NACS. We won the battle but certainly not the war. Where the highway bill is concerned, I don't want to be tarred and feathered here, but I just don't see how we can keep our highways maintained without an increase in federal excise tax. That’s something to look at.
The way the Dodd-Frank Bill's been watered down with the provisions covering the speculation on energy commodities hurts all Americans. The equities market goes up so do commodities and how does that happen? How did the demand suddenly get so great? Because the stock market went up? I think the motorists in the country would like to pay the real value of our products instead of the drummed up price.
Rest stop commercialization is another big issue—it's really going to hurt not just people in our industry, but other businesses and the towns that have made a commitment to developing near the interstates.
Going to 15 percent with ethanol is going to be a real nightmare. The way E15 is being handled is really going to be confusing for motorists. And we’re not sure that all equipment is going to be able to handle it.
Society of Independent Gasoline Marketers of America
SIGMA is a non-profit, national trade association representing some of the most successful, progressive, and innovative independent motor fuel marketers and chain retailers in the U.S. Its roughly 250 corporate members command 30 percent of the petroleum retail market, selling over 56 billion gallons of motor fuel a year.
Frank P. Greinke, CEO of SC Fuels in Orange, Calif., is in his second year as the 2011-2012 SIGMA president. SC Fuels maintains its position as one of the largest suppliers of branded, unbranded, and alternative fuels in the United States. SC Fuels also is a leader in fleet card and cardlock services. For customers who desire to have their vehicles and equipment fueled on-site during off hours, SC Fuels provides mobile on-site re-fueling. Additional products supplied by SC Fuels include lubricants and heating oil.
NPN: How was business in 2011?
Greinke: Frankly, 2011 was a pretty good year and we made a few acquisitions of small jobberships. However, we remain concerned about the slowdown in construction and I saw some reduction in demand from the supply side as well.
NPN: Although it's not seen as the more public face on a range of significant industry legislative issues, Sigma provide strong support for these issues both through its PAC donations and through the personal educational and lobbying efforts of its members. What are some of the hot topics for SIGMA in 2012?
Greinke: There really is a range of issues we keep our eyes on – virtually anything that stands to impact the industry. We're clearly focused on the ethanol mandate and the numerous concerns that go with both losing the subsidy and issues like E15. The commercialization of rest areas is increasingly becoming something to pay attention to. That has been more of a focus at NATSO, but many of our members belong to both associations and have the same concerns. It’s really hard to get very specific since there are so many issues we address.
NPN: Last year, you noted a focus within the organization on attracting and maintaining a solid membership base. How is that working out as you go into your second year of leadership?
Greinke: My two years as president of Sigma has been a great opportunity to help set the association on a course where two years from now, we will have a newly recruited and re-energized association. This industry has been consolidating like most industries, but SIGMA has managed to stay relatively consistent in its numbers and the quality of its members. There was a small rate increase the previous year, which was the first increase the association has had in a long time, but with that we are always working to add value.
Our education and networking opportunities are excellent and we have further enhanced that with the SIGMA Educational Exchange. This is a new online member portal that allows questions to be asked and answered in a safe environment and opens it up to all employees in a member’s company in all areas of operation.
[PHOTO from Last Year]