Aug 1, 2005 12:00 PM, By Mary Davis
WORLEY & OBETZ Inc is committed to improving the environment. The Manheim, Pennsylvania, energy company has demonstrated the commitment with a $1 million investment to convert all of its 10,000 heating oil customers to a 3% (B3) bio-product blend of a soy-based fuel (biodiesel).
However, the company didn't leap into the transition without careful study beforehand.
“We spent five years researching renewable sources, settled on biodiesel, and then began testing the product,” says Jeff Lyons, president and chief executive officer. “No matter how I looked at it, biofuel was the answer.”
He defines biofuel as a blend of biodiesel (B100) with petroleum distillate, which can include heating oil and on-road diesel.
To test biodiesel for Worley & Obetz's heating oil customers, Lyons approached H M Stauffer, a lumber mill, to use biodiesel in its oil-fired heating systems.
In addition to testing the product for heating systems, Lyons earlier persuaded High Steel Structures, a bridge fabricator, and later Wenger Feed Mill, an agriculture feed service, to try the product — the former for off-road vehicle use and the latter for truck fuel.
Finding success in those projects, Lyons turned to residential and commercial fuel oil customers. In a well-thought-out public relations program, Worley & Obetz notified customers that their furnaces would soon be operating with a compatible blended product, replacing the Number 2 heating oil that has historically heated homes and businesses in the Northeast and Middle Atlantic states.
Company literature explained the new fuel oil/biodiesel composition, the performance in furnaces, value in improving the environment and reducing the country's dependence on foreign oil, and Worley & Obetz commitment to the program.
Since the company is located in Pennsylvania farming country near Lancaster, it's not surprising that many customers looked favorably on a fuel containing a soy product produced by US growers.
The customers' positive reactions also were predictable, considering the fuel oil shortages the Northeastern and Middle Atlantic regions of the United States have suffered in recent years.
“All of our customers accepted the transition when we began in October 2004,” Lyons notes. “And, we gained 214 new customers when they heard about it.”
While switching customers to the new product was effortless (no hardware changes were required for customers' storage tanks or furnaces), supply availability required Worley & Obetz to adjust its own operation. Petroleum transports had to bring biodiesel from the few and distant production plants to a storage tank at the Worley & Orbetz headquarters in Manheim. Product comes from plants in Florida, Kentucky, Virginia, Mississippi, Iowa, and Ohio.
Another adjustment involved tankwagon loading times that are increased by about 45 minutes because the splash-blending requires stops at two separate racks, first for biodiesel and then for diesel. However, Lyons points out that Independence Biofuels Inc is constructing an injection-blending facility in Highspire, Pennsylvania. “That's really going to save us some time when it opens in September this year,” he says.
In addition to converting fuel oil customers to biodiesel, Worley & Obetz uses a B5 biodiesel mix in all company vehicles with diesel engines. The company also opened a retail B5 biodiesel fueling site at its retail card-entry fueling station in Manheim and four others across Lancaster County.
“In order to convert to biodiesel, we needed to build an infrastructure to support it,” says Brian Gerhart, vice-president, wholesale. “Our vision of that infrastructure was opening the fueling station for our customers. In the beginning we knew, at the very least, that we would have Wenger Feed Mill as a customer. We wanted to anticipate more customers, but we couldn't predict the successful outcome we received.”
That success adds up to about 50,000 gallons of biodiesel sold at the five fueling stations monthly.
Biodiesel offers some advantages over petroleum-based diesel, especially the ultra low sulfur diesel that will be mandated in heavy-duty trucks for the 2007 model year and beyond, Lyons says.
Biodiesel produces lower emissions and better lubricity. A 2% biodiesel blend lessens engine wear and returns lubricity in petroleum-based diesel to pre-1994 levels, according to some studies.
“Better lubricity is one of the most important benefits of biodiesel,” Lyons says.
Another biodiesel benefit comes from a federal tax incentive that went into effect January 1, 2005, and lasts for two years. The incentive, structured as a federal excise tax credit, amounts to a penny per percentage point of biodiesel blended with petroleum diesel for first-use oils such as soybean oil. A half-penny per percentage is available for biodiesel made from other sources. The incentive was designed to boost biodiesel demand from an estimated 30 million gallons in 2004 to at least 124 million gallons per year.
The tax benefit proved to be a windfall for Worley & Obetz. “We already were settled into our biodiesel program planning by the time the tax benefit came along, but the tax credit reinforced our decision,” Lyons says.
He adds that the company has yet to realize a return on the initial investment, but points out that its owners and managers believe in the environmental benefits and are anxious to play their part in reducing the demand for fossil fuels.
In addition, the company isn't holding out on what it has learned about biodiesel. “We want our competitors to use the product,” Lyons says. “We know we are a small part of the picture, but eventually the petroleum market will benefit as demand grows.”
The Northeast and Middle Atlantic states consume billions of gallons of heating oil each year, which can be seen as a huge prospective market for an alternative fuel such as biodiesel, he adds.
While Worley & Obetz has been involved in the biodiesel project, it has steadily grown other segments of its business that include propane, gasoline, and diesel.
In 2000, the company began providing propane to residential and commercial customers. Today, the customer base numbers 1,400.
Lyons predicts future growth for residential propane use, noting that many new homeowners in rural Pennsylvania and/or urban homeowners without access to natural gas, are choosing propane over fuel oil. “The propane market is much more dynamic than that for fuel oil,” Lyons says.
In addition to propane, the company delivers gasoline and diesel to convenience stores, including its own Molly's, as well as fleet fueling for biodiesel, gasoline, and diesel.
Handling all of these products is a pool of 35 drivers. Worley & Obetz requires driver applicants to be at least 21 years old and have a commercial driver license. The company will train new hires to qualify for tank and hazardous materials endorsements.
Lenny Zvorsky oversees training as the compliance manager. Training includes company policies, Department of Transportation regulations, defensive driving, and hazardous materials handling. Emphasis is placed on loading biodiesel for splash blending.
Lyons says requalifying hazmat drivers for their hazmat endorsements “is going to be a nightmare.” Worley & Obetz drivers will have to travel to Harrisburg for background checks, including fingerprinting, to qualify under new federal security regulations.
Drivers operate a company fleet composed of 11 tractors and tank trailers, 20 tankwagons, and two propane bobtails.
Tankwagons consist of Mack, International, and Peterbilt trucks with 4,000-gallon, four compartment Boston Steel cargo tanks. The company has specified Allison automatic transmissions for three Peterbilt tankwagons and both propane bobtails.
In addition, tankwagons are specified with loading/unloading equipment at each side for easier handling in tight areas.
Tankwagon equipment includes Mid:Com registers, Liquid Controls meters, Civacon API adapters, and Scully overfill protection systems. Worley & Obetz specifies Blackmer pumps on all its trucks.
Propane bobtails are from Arrow Tank & Engineering and have 3,400-gallon tanks mounted on International chassis. They were specified with Fisher valves and Hannay reels. Base Engineering supplied the remote control shutdown systems.
Petroleum trailers, most from Heil Trailer International, have four compartments with a total capacity of 9,300 gallons. Civacon supplies API bottom-loading adapters and overfill protection systems. Internal valves are from Betts Industries.
Peterbilt tractors have 475-horsepower Caterpillar engines and 18-speed Eaton Fuller transmissions. Two transport units are dedicated to transporting biodiesel from refineries to the Manheim terminal.
Worley & Obetz has constructed sloping pads at the loading rack that lead to a containment basin required by Spill Prevention, Control, and Countermeasures (SPCC) rules from the Environmental Protection Agency, Gerhart says.
The terminal at Manheim has two loading racks, one for biodiesel and another for fuel oil. Storage capacity totals 600,000 gallons, plus a 10,000-gallon underground tank for biodiesel. The racks are equipped with OPW loading arms, Smith meters, Veeder-Root registers, and Roper pumps.
Companywide, product storage capacity totals almost one million gallons. “With that inventory reserve available across our operation, we are able to provide protection from interrupted product supply due to bad weather or pipeline issues,” Gerhart adds.
Company operation was begun by Raymond C Worley and Robert W Obetz Sr in 1946. Robert W Obetz Jr, a third-generation family member, continues as owner and chairman of the board of directors.
The company is experiencing growth, realizing current annual revenue of $225 million, up from $18 million less than a decade ago, Lyons says.
Company managers understand the importance of growth in order to compete in the petroleum market. The company has recently acquired five heating oil companies and continues to look for other opportunities in the Lancaster County area.
“Small companies in this market have trouble competing,” says Lyons. “That's one reason we began looking at alternative fuels as a way to grow. We see ourselves as a full-service energy company.
“We believe in the biodiesel product and remain completely committed to what it stands for in our industry, the environment, and the country. At this point, we're not competing with other companies by handling this product. I want to see our use of this product mirrored elsewhere in the East Coast, and hopefully throughout our nation.”
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