Propane Infrastructure Webinar (Text Version)

This is a text version of the video for Propane Infrastructure Webinar presented on Aug. 12, 2014.

COORDINATOR: Welcome and thank you for standing by. At this time all participants are in a listen-only mode until the Question and Answer session of today's call. At that time if you would like to ask a question please press Star 1. Today's conference is being recorded. If you have any objections please disconnect at this time. I would now like to turn the meeting over to Mr. Dennis Smith. You may begin.

DENNIS SMITH: Okay thanks everybody for joining us. This is Dennis Smith. I'm a National Clean Cities Director at our Department of Energy Headquarters in Washington, DC. Thank you everybody for tuning in for today's topic. We're going to be talking about how to determine pricing and for or the cost associated with building infrastructure for propane refueling and different things that could affect that. And then also some experiences for what's worked well in the field.

So we've got a number of experts that are with us today. They're going to walk us through this. And just try to keep in mind we're not really trying to teach you to be an estimator to figure out exactly what a station's going to cost as much as we're trying to help you plan and get in the right ballpark when you're talking with fleets who are considering propane and want to know what something might cost for general budgetary reasons or things that might cost a station to cause a station to cost more or things they might consider if they're trying to keep the station cost down.

So it's that kind of a presentation and then we also have a companion piece that we're releasing that had some of the same information that will help you with some of this estimating.

So we will have a time for questions and answers afterwards and if you've got questions that pop up during the Webinar you can click on the little Online Question box and submit those at any time or if you're having technical difficulties and can't see some things and your screen's not working right please use the Question box to send us that and we'll try to address it as soon as we can.

So with that let's kick things off we've got several speakers. First up to give us an overview of propane stations and some of the things that will be talked about so you'll get more familiar with the terminology and see some pictures of what these things look like if you haven't seen them before is Curtis Donaldson with CleanFUEL USA. Then after Curtis, Rob Little from Pinnacle Propane is going to talk to us about leased station examples and how that has worked for some customers.

And then finally Ron Latko with Latko Consulting is going to talk to us about his experiences with the Mesa Public School example and how they use propane.

So with that I guess Curtis we'll turn it over to you to kick off with the overview.

CURTIS DONALDSON: Great thanks Dennis. I appreciate it. Thanks everybody for joining the propane infrastructure Webinar today. I want to start with a special thanks to all the Clean Cities coordinators whom we work closely with through the years. These coordinators have a lot of this information have gathered a lot of this. I'm glad the White Papers coming out now that will help and assist more clearly but certainly they are the education and deployment experts in the USA when it comes to all alternative fuels and certainly appreciate all the help they give really all of us in this market space.

CleanFUEL USA has been in business 21 years providing station equipment solutions really globally for fleets, propane marketers and oil companies. We also supply provide engine system technology to OEM partners like General Motors and Freightliner Custom Chassis which also includes the Thomas Built Bus. Additionally we recently began supporting the rollout of 1,000 UPS packaged cars and 54 skid stations. So a lot of our topic today will be very relevant to projects similar to how that project is rolling out.

So as you can see by the first slide with the - just as it notes that we're really generally geared towards a turnkey solution provider that not only includes station equipment and vehicle technology but also includes the service support for the vehicles and the stations, the marketing support and certainly connecting fleets to a fuel supply with the marketers around the country.

So if we'll go to the next slide, key components and costs probably spend more time on this slide than the rest of them. So by the time we get to the end of this slide don't think that each slide's going to take that long but this is really the detail slide that goes through and goes through each of the components. Propane is a liquid fuel enjoys similar equipment if you will and similar cost is the traditional fuel.

So one of the big benefits of propane equipment in stations is relative to other alternatives let's say is a little more of a seamless offering both on costs and operating because again we are a liquid fuel. The key elements being the tanks certainly, the pump and motor and the dispenser at each site to allow that site to operate to dispense propane into the vehicles.

So we'll start with the storage tank and it's the biggest cost variant. As you can see the - on that first bullet point the price range is between $5K and $100,000 and certainly what that gets you is anywhere from a small storage tank to one of the larger ones. We'll talk about that in a minute. But the size is typically affected by the available space on site so as people approach the site one of the first things we'll be looking at as we help integrate equipment is what is the fleet needs? What are their fuel needs?

So how many vehicles will be filling up? And then based on that and the size available at the site we'll then can make some determinations on what's the largest tank we can put in there because that's what we're going to do so they're not having to be filled up as often at that site. So that helps in that regard. Again the cost range from $5K to $100K. The most popular tank size is typically seem to be the 2,000 gallon it's a standard size tank in both the horizontal or a vertical configuration.

And typically once we leave the 2,000 gallon range we're starting to see some 4,000, 45 hundred gallon which is more of a bobtail size tank and people are using those at sites that way they can do a full drop. But typically we see them go from a 2,000 all the way up to a 12 or 18 so they can accommodate a full transport load. Again we'll talk more about bobtails and transports here in a little bit. But those are the things that take in consideration at a site when you're looking to select really your tank and your storage.

What's also helped is the tank monitor like you see most propane companies will put tank monitors on they're very common place now that way the marketer can monitor what the fuel inventory in the tank and ensure that the fleet doesn't run out. And in some cases thanks to the tank monitoring some fleets actually do keep the size of the tank smaller knowing that they're not going to be in jeopardy of running out. Again, we'll talk about bobtails and how easy it is to refuel these with bobtails that are scattered across the country. But tank monitoring has also played a role in sizing of the tank.

Shifting now to talk about dispensers. Dispensers range in price from $5K to $35K. The pictures on this particular slide depict a couple of the fleet models. They'll be pictures throughout the presentation that actually give you the other dispensers I'm going to be talking about which is more of the full retail and the high hose units. The lower end of the price range is a single hose fleet type unit that can be connected to a card reader or a fuel management system.

And again on this slide there's two such fleet units here on this page including if you'll note the dispenser to the right is the Gasboy propane unit. And I want to point out the significance of the Gasboy is that fleets in America that still have gasoline and diesel located on their sites and I know a lot of that went away back in the 90's and the UST days the underground storage tank issue days but a lot of those fleets still have gasoline and diesel have Gasboy gasoline and diesel units.

And so the significance of now having the Gasboy unit is we can go into fleets and if they already have Gasboy on site for gasoline and diesel we can put a Gasboy and propane dispenser in it ties seamlessly in with their Gasboy system. So just one more really to show you that propane has made it very seamless with the products including this particular product. These fleet models the CleanFUEL USA and others make can be for private or public fueling.

The mid range would be more of a high host single or a dual retail unit that's also capable of being connected to a card reader. These units again are seamless but currently the dispensers you'll see the gasoline station. So again when you pull in to fill up with gasoline or these fleet customers do once this typical mid-range dispensers on site they'll see that what they're interfacing to is no different than what they would be interfacing to if they were pulling into a gas station.

The high end of the price range for the propane dispensers would be the same retail unit single or dual with an incorporated card reader or what some people refer to as a crend and again that's similar to what you'll see on the next slide when we get to it we're not going to turn there yet but when you see the next slide you'll see a Gilbarco Encore or maybe a slide or two back that has a card reader in the face. And again that's the seamless operation to what you'll see for gasoline.

And then moving on to the pumps and the motors. So these range in price from kind of $4,000 to $15,000. The newer high differential pumps similar to the Corken 075 which is what we use at most of our stations along with the 5 horse power or a 7-1/2 horse power motor are perfectly engineered for the new OEM auto gas vehicles and creates sufficient differential pressure to ensure that the sites that you pull into that feature these high differential pumps can pump 10 plus gallons per minute fill time and again that's similar to traditional fuels.

And the significance of that is when fleets transition they want to maintain that efficiency on fill time. So they really don't want their packaged cars or delivery trucks held up with slow fill times because that's driver time that he could be delivering. So a lot of folks certainly the fleet level understand the significance of being able to dispense at 10 to 17 gallons a minute which most of the sites we install do and it's because we have the larger higher differential pumps in place.

The bottle fuel pumps typically don't pump as fast and certainly don't get the 10 gallons. So I want to make that distinction between sites where you have a smaller pump and a smaller motor and filling these newer liquid injection systems on these vehicles that are coming into these stations. So the higher end of the pump range would be really a multiple of pumps typically used at a site that has either larger storage or multiple dispensers.

So that's only usually the only variant on those pumps again as when you go to multiple pumps.

And then the last bullet point on this particular slide is the fuel management system. It really ranges from a basic card or key system on the lower end say something similar to a fuel match or other that we incorporated some of our sites with simple fleet software to run fleet reports. All the way to a full blown RFID system it features tags that are integrated on the vehicle like a toll tag.

And then also a reader on the dispenser nozzle and in those cases the fleets can pull up and the driver can fill up without interfacing to the dispenser. Literally lifts the handle affixes it to the tank and fills it up. And we still capture his data through RFID. And then really the higher end of the range is a fully integrated card system that probably even features back office and really custom software. So I would say more often than not these systems range probably a lot more typically around $7K to $12,000 not up to that $30K.

So if that $30K range you're probably talking about again a fully integrated card system with custom software and a back office system all three integrated at that particular site.

So going to the next slide on how a propane station works we'll talk a little bit about system site requirements for refueling. Stations can come as fully integrated with skids similar to what UPS is deploying with a tank, pump, motor, dispenser all mounted on the skid. And if you'll look at that picture to the far left, you know, that is a skid mounted unit. We can drop and we can build all of that here and then drop it in site on site. Work with the customer to make sure the concrete pad is poured and that the electrical is pulled for this.

And so it saves a lot of construction time on site to have these skids. We can pre-(plum), pre-wire for installation, so it makes it a lot more efficient process when we get to the site to install it. Installation cost really varies based on need for concrete and running electrical and setting bollards. The electrical can vary as some of our customers have found out depending on what they have on site and how far they need to pull it which certainly needs to be carefully planned.

So also site prep work to move dirt and prepare for a concrete pouring can affect the prices. Well a lot of people say hey Curtis range me on what it's going to cost to put it in and typically we have to go out and do site surveys because that helps us understand what the breath of work is going to have to be as far as pouring concrete, pulling electrical and what those installation costs may look like based on that. Because a concrete pad for a skid is certainly going to be a lot different than a concrete pad or setting saddles for a larger tank.

And so my advice to everyone is always have someone come out and do a site survey so we can understand that and then sit back down with you and go through what some of those cost range may look like more specific to what you're going to do as far as tank sizing and where you're going to mount the dispensers.

So also the sites prepared one of the considerations when you're building this is the consideration of how you're going to refuel the site to accommodate for a bobtail or a transport to pull into the site to refill a tank and certainly that's something that has to be considered. And then this is a good spot to talk about that for just a second. Propane is delivered to stations via bobtails which can deliver typically anywhere up to 35 hundred gallons per drop.

You know, there's a variance to that. Some bobtails are smaller some are larger. But can deliver that many gallons on a full drop. Typically the sites that have 2,000 gallons obviously are going to take smaller drops off that bobtail but you have to have room and again to accommodate the bobtail coming in filling up that tank that's on site.

Propane can also be delivered to the sites via transports which can drop 9,000 gallons and that's probably what most of you are use to seeing if you've ever been at a gasoline station when they've been refilling the station those are transports that are dropping off that gasoline. We have transports in the propane industry that can take 9,000 gallons to the sites that have larger tanks. So fleets that put in the 12,000 or the 18,000 or the 30,000 gallon tank certainly those sites can be revealed with transports.

And the consideration here is transport cost delivery of propane is less and then the cost of delivering via bobtail. So depending on the gallons needed you'll look at the economics based on how many gallons am I going to need as a fleet. I'm going to put in larger storage but then I'm going to save money on my delivery cost because I'm using transport delivery versus bobtail delivery. So those all play kind of key roles and making those decisions.

Another good time to just throw this in about our industry is that one of the big plus of the propane industry from the station and delivery site is the mature distribution that covers the United States. So there's - as many of you know there's a network of pipelines around the country that move propane to terminals. We also have refineries that make propane. So between the terminals and refineries we're spread out all over the country. We're everywhere. We're delivered to every town for a variety of usage for propane already.

There's 35,000 bobtails. There's 10,000 transports. So we've got the USA covered very well as an industry to make sure that we're where we need to be to deliver propane to these stations that we've been talking about. So anyway I wanted to cover those two topics as well.

And then the private site public site mobile fueling private is typically fleets that where we put this on their own property just as you can imagine. It's only used by their company. And most often features card readers or fuel management to capture the data by vehicles. Those fleets want to know who got fuel when, where and how much they got so they can, you know, they can do their studying to see what their fuel economy is and how this is working out.

So and then of course depending on space they may install a larger tank public. Just as it says it can be is for public refueling so anybody can stop there multiple fleets. Of course this is an advantage as we move in this alternative fuel space to have more public refueling so more fleets can access it. So it can be tricky based on the tank size though and permitting. Again usually the public sites we see at 2,000 gallons or less and usually a high hose dispenser so it looks more like the gasoline dispensers on site.

So and then of course mobile fueling is something that we can do as an industry that not necessarily everybody can because of those 35,000 bobtails is we can if you get to your vehicles too early and the station's not ready we can wet hose or the bobtail can come out and fuel your vehicles that can be set up on a semi-permanent basis or a temporary basis as you need and our bobtails can move around certainly if a vehicle runs out of fuel on the highway that same bobtail can go out and also fuel the vehicle on the road as well so it's good to have that mobile refueling around the country.

And then the last bullet point on here cylinder replacement just going to quickly say propane marketers across the country already offer a variety of services relative to pre-fill bottles for forklifts, lawn equipment and airport equipment. So on the cylinder replacement contact your local propane marketer. All of them have different programs to make sure you've got cylinders for whatever other vehicles again forklifts or lawn equipment that run on propane and they'll drop these off pre-filled so you can just exchange them out and put the fill bottle back on there.

Going to the next slide factors that affect the cost. On the first bullet purchase and leasing. Rob Little's going to talk about that in greater detail so I'm not going to cover that other than to say many customers currently purchased the equipment if they can utilize grants or if you live in a state that offers tax incentives for infrastructure. Otherwise leasing does offer you the ability to pay as you recoup savings through lower fuel costs. So it's a good way to not put the capital out there.

On the installation and site constraints certainly the size of the site has a lot to do with it, you know, can we achieve the set backs that are required by NFPA58 so we can get this site permitted. There's certainly a lot of considerations. I've already talked about a little of these so I'll speak through some of this. But is the electrical already there? Certainly the local authorities are the ones that end of making the final decision. Some states have oversight like Texas and California.

You have to go get that box checked off and take a site survey to them and site drawings and get them to approve the site. But then at the end of the day it still gets down to the local authorities making the final decisions on if they'll allow you to add propane to either a fleet site or to a retail site. Again propane marketers across the country have great experience at this through their past experiences of working locally with these local authorities.

And so really the fastest way to permitting is to get with the propane marketers who through the years already have a relationship and a reputation with these local authorities to get your permitting done. But plan ahead because permitting can take time every state's different every city is different so certainly one of the considerations that should be brought up early on is just that and that's to talk about what the permitting is going to take.

As far as above and below ground tanks mostly it's above ground. They're easy to serve, easy to service, easy to fill. It does take up space. Certainly below ground there's no visual tank. It conserves space but it does cost more. The tank's coded differently once it's buried then there's cathodic protection but again it's harder to service. Most people like the tank above ground because they can see it they can deal with it and they can operate with it.

And then really my last slide on the operational cost I'm just going to note a few things here. On the charging for fuel on this first bullet point certainly there's several models that exists where propane marketers will provide station equipment for the fleets and then amortize that cost over a three to five year fuel contract. Thus the fleet's not out any capital. But in turn they'll pay a higher price for the fuel but in their minds a lot of the fleets are saying hey, you know, I'm also still saving versus traditional fuels.

So if I have to give up 50 cents to amortize it and I'm still saving a dollar I'm still better off. So, you know, there's a lot of programs and a lot of marketers will talk to you about hey you give us a fuel load we'll put the equipment in you're not out the capital we just need a fuel contract. So that model exists today and certainly you can find out more about that.

As far as ongoing maintenance with propane station it's very minimal as is the ongoing cost. On the maintenance side annual servicing of the meter and the dispenser and annual really and really just to go out and look at the pump and it typically doesn't need servicing on an annual basis but while you're there servicing the meter you look at the pump and then we typically tell everybody the first year to do a quarterly check on the nozzle.

There's a filter on it and just make sure everything's clean and you're getting your maximum output out of the dispenser through the nozzle for a tank fill.

And then on the last bullet point and I'll just say that typically liability cost is minimal to add propane especially if you've already got other fuels. We've not seen that as a burden that anybody's had to add the cost and it make the change in their decision. Liability varies from states to even local based on where you're installing it. So but I wanted to kind of get away with, you know, do away with any myth or anybody that thought that I be there's a high price to add propane. There's really not and it certainly hadn't altered anybody's plans to install propane. So it's certainly nominal.

And really that kind of wraps up my slides. I know Rob's going to talk to you more about the purchasing and leasing side and certainly they'll be Q&A at the end and I appreciate the opportunity to talk to you today about the propane infrastructure.

ROBERT LITTLE: Good afternoon everyone. I am Rob Little with Pinnacle Propane. I started on the auto gas side of this industry about four years ago with (Gulf Stream Tech) at the time we were doing and they are still doing full vehicles and that sort with propane (colored sewer) systems. Transitioned over Pinnacle Propane a few months ago to help oversee auto gas sales efforts. So the infrastructure that we're talking about today is primarily what we're focused on.

We're also looking into some things like commercial applications, landscapers, forklifts and heating and things of that sort that have been a huge market for us. Our is about eight or nine states in the Southwest United States. Our business development team consists of about five guys that we've deployed probably about 25 hundred to 3,000 propane auto gas vehicles across the US.

Our executive team averages a little over 17 years of experience in the energy industry and we've grown by about 22 hundred percent since we actually opened which was back in 2010. So this is kind of the structure of our company. JP Energy Partners is the overseeing parent company and then we've got a few different divisions. We were set up as basically a refinery services company and mostly mainstream applications.

So we're not actually taking fuel and natural gas or crude oil out of the ground but we have some refinery services. We have storage facilities. We own pipelines. We're heavily involved in all the major basins such as the Permian basin that you hear talk about all the time today. And then we have a retail arm which are going to be Pinnacle Propane, Pinnacle Propane Express, Alliance Gas and then part of JP Energy.

So we'll talk a little bit about leasing versus ownership. We want to kind of step back and take a look over our experience what do we find that the customer really wants and then what do we find that the propane (buyer) really wants. When you compare those two and kind of align those goals you can get the best service and the best value you're looking for. And generally we find the customer is getting into propane power vehicles for value.

They know that they're going to save on maintenance cost. They know that they're going to save on fuel cost but we got to make sure they have the right service provider to get that done. Sometimes it costs 5 or 10 cents more for to be able to have the right service provider and coverage but it's worth it. Consistent fuel supply is huge right when we think about operational risks say you're a company like UPS (which is the) very large (deployment) of propane vehicles.

Well if it's Christmas time and they don't have a supply of propane and their vehicles are powered by propane they've got a big problem right. So operational risk is something that has to be considered when you're looking at a propane supplier and a propane supplier relationship which is more than just the transactional side of hey come fill up a tank upside my home 200 gallons every couple of months. It's an ongoing relationship more so for partnership. Responsiveness is huge.

Are you being billed on time? Is service being acknowledged quickly? Are maintenance requests being acknowledge quickly or are they being taken care in 48 - 72 hours things like that? Or are we there on the next day? And then quality equipment. Is it reliable? It is easy to use and does it pump at a high gallon per minute?

As Curtis talked about one of the things we've learned in the industry is the old systems were so they didn't really have pressure differences they were very easy to fill with your standard equipment that you might see at a U-Haul or something like that.

When you get into the systems that are dedicated like the clean type system that cleans system the technology is way more advanced in a good way because it's easier to service and they operate better but there's a pressure difference where it builds up so you got to have the right equipment in order to get the gallons per minute otherwise you could be (staying on the phone) for a while. Again its part of the operational value risk ratio you how to look at.

On the propane supplier side I didn't know this much about this until I started with Pinnacle Propane. We (saw it) over in the world that, you know, this stuff wasn't a huge deal the propane supplier (we just come and drop a tank) and it would be no problem because they made which there is capital that's involved in that. So what the propane supplier really looks for is loyal partners. We want partners that are going to collaborate and they're going to be open to sharing their needs.

Are you planning to scale this up? We want realistic fuel consumption estimates right? We want to know are you going to use 10,000 gallons realistically or are you going to be using more like 3,000 gallons per year. We need to know that for our certifications and get to the best you have. Volume is good on the auto gas side of the business right. When you think about the average residential customer in the United States daily consumer about 12 hundred gallons.

We're all about propane business so all the gas customers are going to be great for us because they're going to consume at least 2,000 gallons per vehicle of propane. demand is huge right. When you look at the residential heating market which is the largest one in propane you see very seasonal demand in the winter markets a very curved demand.

When you get into auto gas unless you're dealing with the school district that doesn't operate in the summer time or maybe some landscape customers that are primarily going to be in the (North) operating during summer months the years - the demand is going to be year around and that's very good to have that steadiness. And then commitment right we want customers that are committed to the benefits of all the gas and they're going to partner with us not only to expand their use but to broaden the knowledge in that region.

When Ron Latko who's going to speak in a second when he was with Mesa Schools was one of the best partners you could possibly have as a propane company and as a fuel system manufacturer because he was an advocate for the product he knew everything to a tee what was going on in his operations and it was a great benefit for us in the industry to use him as a resource as apposed to us just going on (and tell the) customers they could hear it from one of their peers and it carried a lot more weight.

So (weighing the options) right this is basically your Benjamin Franklin and pros and benefits chart here. So the benefits of leasing is you're not going to be responsible for maintenance whatsoever. If you own the system you might have some maintenance. Now you can always outsource that but there's going to be some costs associated. If you lease - if you defer all of those costs and all of that maintenance just like if you leased the vehicle for three years you put all of that onto the equipment owner.

You get relationships built if you lease the equipment. If you go out and you fuel every month, every year and things like that you don't have that long term relationship built up which could change the responses that you get from the companies you work with. Consistent supply price lock in I know at our company we have the capability to lock you into a fixed price for 12 all the way up to 24 months. All we need is a pretty good fuel estimate of what you're going to consume and we'll lock you into the price.

We go out and we purchase that supply from the suppliers that we work with and then we hold it for you over the next 12 to 24 months to make sure your price doesn't change whatsoever. When you look at winters like the one we just had that's a huge, huge advantage because obviously propane prices (jump quite a bit). When you lease the equipment you can write into the contract some options to revisit price structure based on actual value right.

So if you say we'll probably going to use 15,000 gallons this year but you add a bunch more vehicles and expect it and you start using 25,000, 30,000. If you're leasing you might be able to take a look at that volume because you know you've got a long term relationship there. You have very minimal capital investment. You have high and immediate deployment return on investment. If you go out and you buy a station for $50,000 you're already $50,000 in the hole. If we give you the station and no cost up front your return on investment begins immediately.

Equipment upgrades are much easier when you lease it because you don't have to buy a new pump right. So say you get a 5 horse power pump and it's not doing the trick for you and you want to see how 7-1/2 horse power pump or you're going to in some cases a 10 horse power pump if you're showing at once you might need a 10 horse power pump. Well you can defer that cost onto the company that leases them.

Scalability falls onto that regular inspection and then the regional extensive national regional support. The benefits of earning of course is you can bid more regularly right. You can bid monthly. You can bid your yearly things like that. Generally you're going to see a lower price per gallon. I'll show you some examples in a second and kind of qualify that. But, you know, that can range anywhere depending on volumes from 10 cents a gallon and maybe even up to 20 to 30 cents a gallon.

You get a little bit better sense of flexibility and then there's some potential tax advantages that if you own the equipment versus leasing it. So what changes? If you own the equipment versus lease it if the user of the station is going change. Generally it's not you're still going to be filling the vehicles on your own whether it's your drivers or you have a dedicated fueling person that's not going to change.

The station maintenance is going to change regardless whoever owns that equipment is responsible for making sure it's maintained, inspected and certified. Again you can defer that to whoever your propane supplier is but there's going to be some form of cost associated with it. Station location isn't going to change. You can still use the same equipment whether you purchase it or whether you lease it. The timeframe is going to be unchanged and that's referring to timeframe of installation.

The only time you see that change is if the capital is not readily available from the customer and if the propane company is not willing to begin the project without any type of financing behind it. That's pretty rare but every now and again it happens. The local (layout) is not going to change and then the training the only part are you responsible. Ninety nine percent of the time when you own your equipment you're just write into your fuel agreement that this (buyer) is responsible for ongoing training of drivers and station users and things of that sort.

It's a big move in the station. The first example customer I have is Kansas City Transportation Group. They're going to be using about 250,000 gallons of fuel per year. They're going to scale up. They're going to have a bunch of (Impalas) with the new direct inject system that are running. They're also going to have a bunch of (50 cut aways) that are running paratransit routes all around Kansas City.

They have an 18,000 gallon fueling station. You can see the tank is Gray in this picture. It just hadn't been painted white yet because that installation was still being completed and . They're going to have two pumps and they're going to have two dispensers so it's entirely redundant which is great. If one of those pumps for some reason fails they'll still have one pump in the dispenser that's going to be available for working.

The planned gallons per minute is going to be right around 12 to 15 gallons per minute out of each hose The reason they chose to lease is because they have a national contract with a group called Alliance AutoGas and by leasing they have no capital outlay whatsoever. That station would have cost about $250,000 with the permitting your and (site prep). They have no maintenance concerns.

They don't want to be the experts in the fueling station or the equipment they want to just go out there and say you guys handle it all and just make sure it stays full no matter what. And then the savings that they're still expecting is about $8,000 to $10,000 per transit cost per year. The prices (were impacted) by not owning this equipment especially since they're such (high volume) by around 10 cents, 12 cents per gallon.

DHL is another customer they purchased a bunch of vehicles for Tech they've got some (friend's) vehicles that are operating on propane no background really needed on DHL and what they actually do. They're a delivery company out of Germany primarily for international delivery. They just got 1,000 gallon fueling station. They've got one dispenser. And on this particular location we ran into some permitting issues and we weren't able to pull electrical wiring across their driveway for some reason and over to where the fueling station was.

So we bought a generator and dropped it in. And so that is actually a circle system where that generator is powered by propane. And when you go to fire up the system as apposed to triggering the electrical (free phase) to kick in for the pumps that generator will turn on and that's what powers the pump's entire system itself. So it's pretty neat stuff and it's absolutely something that can be done. It's about a $50,000 station the generator probably added about $15,000 in cost to that and maybe $60,000 to $65,000.

They just renegotiated their pricing. Their pricing right now is extremely competitive it's probably right at what they would be paying if they only put (in themselves) and that's because their volumes are high enough to justify it. And like I said when you leave you can go back and renegotiate that pricing if your volume rises and as you see your volume go. The big reason they lease is because they want a standard package at all of their locations.

Right now I think they have about 10 or 12 different locations across the US that are running these propane vehicles. Every one of them has the same exact fueling station package the same tank, the same dispenser and everything else. Some of their regions needed scalability because they're going to have 10 vehicles to start with and then they might grow to 20, 30, 40 vehicles and some of their larger .

So we're working with a fleet in Texas They just bought three trucks and they're going to have about eight propane power . So when we ran the analysis their consumption is going to be 24,700 gallons per year. The dispenser you're looking at is one of the more basic dispenser packages that Curtis had talked about before where it's not the - it doesn't look exactly like a tower you see at a gasoline station it's still adequate so it pumps its 15 gallons per minute it's just a little bit different working and a little bit less tower.

So if they were to buy the equipment it would be about $35,000 capital outlet. They are going to save 21 cents per galloon if they owned the equipment as apposed to leasing the equipment. So 24,700 gallons per year it's going to take them 6.75 years to break even on their (infrastructure investment) that's where they have to step back and take a look at the numbers side by side and say what makes the most) sense for us and what we want to do.

Now if it's (pilot) program and they think they're not a 100% convinced the vehicles are going to work the way they want them to in the I'd say lease it because that way no matter what you're out of the equipment after three to five years when that lease contract is up. Propane providers can grab their toys and take them home. If they're 100% committed to the program and they're going to consistently buy them and they plan to run propane vehicles for 20 years then the 63 quarter year break even is not that bad of a deal.

Another fleet that I'm working with is going to consume about 105,000 gallons a year they're located in Texas as well. When we ran the numbers since they're such high volume and they're looking at a 3,000 gallon storage tank and two dispensers with two pumps it made sense for them to lease the equipment as well. Their actual infrastructure investment was going to be $59,500 and they were going to save 10 cents pre gallon. So it was going to take them 4.953 years to break even on the contract.

But what we wrote in there is at the end of five years they'll own the equipment anyways. So whether they spend $59,000 up front or whether they go through a five year contract and they own all the equipment at the end of the agreement.

(Results). Some of the benefits of the propane and especially in partnering with the provider that you lease from is if something goes wrong with that equipment you can write into your program that you do specials.

If they do a skid system like the ones that are shown both in the top right and bottom left they're relocatable right. So if you move houses or if you take them from one terminal to another terminal then we can drive that equipment take it and drop it on site pretty much in no time with no problem. The other thing is when you lease it's very scalable. Some fleets actually start with a 1,000 gallon storage tank and over time they expand all the way up to 18,000 gallons a storage.

I've seen numerous school districts being tested make that jump and it's becoming more and more common as that market grows. Business continuance and we talked about operational risks. If you lease the equipment business continuance plans become a little easier because you partner with someone long term. So you're consistently talking with (our propane) providers you're not jumping around trying to find a different provider every month.

And when you build that long term relationship and then they understand your business they make sure that you have fill whether it's (flash) fill like the bobtail on the bottom left picture or if it's a portable station like we have in the bottom right. That's one that runs off a propane generator it can be hauled behind a trailer. It's got a 1,000 gallon storage tank and it can work basically anywhere.

Again when you build those long term relationships the propane providers wanting to make those investments and make sure you have business continuance. So the last thing I'll say there's one thing we know that fuel is right whether you're a school district or you're DHL, UPS, a landscaper you have a cost that is going to be fuel. So one thing that we know and we can give you all the testimonials that you could possibly ever want to see is that propane is a driven investment.

So choose the best value you have. Choose the right providers and there's a million people out there willing to give you the information you need. All you got to do is pick up the phone and call us. So thanks for your time and I'll turn it over to Mr. Latko.

RON LATKO: Thanks Rob. I just want to tell everybody I think it's pretty easy being green as you two have explained. My name is Ron Latko and I'm from Latko Consulting and I want to thank everyone for inviting me to speak.

I retired in May at the end of the school year from Mesa Public Schools as the Director of Transportation and Fleet Management. There I oversaw a fleet of 545 school buses and 613 support vehicles. This is a delivery of our first propane bus. In the background you can see the temporary 1,000 gallon tank that we had. It was skid mounted with a dispenser. There was no fuel monitoring system on this tank. I'll tell you first about our budget for the year 2010.

This was the last year of bond money earmarked specifically for buses and we knew we weren't buying diesel and we had committed to propane. The cost of the turnkey installation of the 18,000 gallon tank was an easy sell when you consider that the return on investment was going to be 18 months. School districts have the advantage of knowing the exact fleet size needed for the year and the number of route miles they will minimally run making these calculations easy.

Your propane provider has much of the expertise needed to make recommendations regarding your infrastructure. You need to know where you plan to be with your propane fleet size now and as the years go by. Although we started with the 1,000 gallon tank it was just a stock gap allowing us to seamlessly in propane buses into our fleet upon their delivery. We knew we would be receiving buses prior to the completion of the installation of the 18,000 gallon in the ground tank.

Infrastructure location. Both at the Freemont site and the Broadway site we have great locations for 18,000 gallon tanks that are installed and operating as we speak. The 1,000 gallon tank has been used at all three sites it's the same one we started with a couple of weeks or a couple - when we first -underground installation was completed. I just - okay - we had a slight error here and I'm correcting it with the slides. Okay sorry about that.

This is the fueling at the Freemont site. This is our first site. Our vehicles fuel easily in the same amount of time as a diesel bus. There's no problem fueling all 250 buses at Freemont our largest single location. Right now we have one dispenser with two hoses and a second location all prime ready for another two hose dispenser that you can see in the foreground. The final station design this shows another perspective of the station you just looked at from the other side of the dispenser.

Our research indicated that we were committed to convert the entire fleet over the next several years so there was no reason to hesitate and start with only a 1,000 gallon tank for several years and then convert to larger tanks. There was far too much money to be lost.

The process for choosing a tank size. Three are many, many tank sizes to choose from. We wanted a storage tank large enough to handle our current and future needs that could be placed underground. Common sizes for underground installations are 65 - 65 gallons, 12,000 gallons, 18,000 gallons and 30,000 gallons. We have our other fuel tanks underground and it made sense to do the same with the propane tank.

The above ground tanks as some of the previous speakers have stated there are many, many tanks to choose from and you can install these in both the horizontal and in an upright position. You can install them side by side. There's a lot of variety for you to choose from. The separation between tanks is going to be as little as 3 feet until you go over 2,000 gallons and then you have to go 5 feet.

The 1,000 gallon tank. Although this is not the temporary on skid 1,000 gallon tank that we had this is a very good photo of a very, very, similar situation. This is a permanent now and this shows on the right hand side a fuel management system.

We of course on our 1,000 gallon tank don't have a fuel management system we have the dispenser and you can see the pump just as it's showing as far as it would be if you had a slide of our actual configuration. Because it was temporary we placed it in an easily assessable yet out of the reach general traffic location with close proximity to electricity. This came with its own dispenser giving us the complete package.

From a cost standpoint there were no specific price - there was no specific price for the temporary tank as it was incorporated into the overall job corp. The 1,000 gallon tank installed and ready to go with dispenser will run about $30,000 to $60,000 depending on the location proximity to electricity et cetera. Also I know that Ferrellgas and other major suppliers will incorporate the price into the price per gallon of propane and you will pay off the price based on fuel usage.

On tank to dispensers. The timeframe for the installation. We knew this would be a quick install 13 days and because we were given regular updates from Blue Bird on the delivery of the buses it was relatively easy to coordinate the installations of the small tank to allow for training time of drivers and other staff and a simple fueling process prior to the arrival of our buses.

The question, were there any challenges that came up during the design permitting or installation? Not really Ferrellgas handled all of that as part of the proposal requirements that we put out. I would believe that because of the vast amount of this type of work that they do here in the Phoenix metropolitan area they are well aware of the requirements and timelines. There were no challenges whatsoever. It was for all intensive purposes the best project we had ever run.

This is a photo showing the 18,000 gallon tank being lowered into the ground at the Fremont location. We're in Phase Two now we have the 18,000 gallon underground tank finished and move 1,000 gallon tank to the Broadway site. The station designed we worked with the district's new construction department and Ferrellgas to determine the best location to the tank taking into consideration that we currently have underground tanks for both diesel and gasoline in the same area.

We included one dispenser with two hoses and the location for a second dispenser with all necessary lines for electrical, fuel and fuel management system already in place. The cost the big price for the original turnkey 8,000 gallon tank and this was turnkey was $280,000. This is the view showing you the finished project at the Fremont Station. You can see the original dispenser on the left and the place for the next dispenser to go in. And on the right the location where the underground tank is.

You'll note that that's a curbed off area and that is not a new curbed off area that was put in because of the tank that was an area that was curbed off prior to the tank being installed there. It was used to help the flow of traffic getting into the fuel station. The big process was drawn out with three addendums and changes and due dates. This made the ability to have a temporary fueling station in place more critical. The bid was awarded in late July with construction to be complete on the 18,000 gallon tank December 1, 2011.

A temporary fueling station was necessary as stated earlier but there were no surprises. There were no challenges of any kind. The tank was finished ahead of schedule.

Now I move to the Broadway location. This is Phase Three the installation of the of the second 18,000 gallon underground tank and moved the 1,000 gallon tank to our third site for safe relocation.

Station design. This was a more difficult problem because this bus yard is very crowded and like the other yards that already has diesel and gasoline tanks underground. We met at the site and brainstormed our way to an incredible solution. There is a place in the yard where the buses are parked nose to nose. Because of the front tires are back on the front of the bus so it was considerable distance between the front tires of one bus and the front tires of the bus facing it.

All it would take was to have a few of the buses on either side are the couple of feedback from where they were wide and to widen the space enough to bury the tank. The fill line for the tank was then run off the end a short distance from the bus driveway and it's a very convenient location for the tankers to pull in. The other end of the tank is in close proximity to the new dispenser.

The cost. We ended up paying more for the second tank installation. This was primarily due to the increased demand for these tanks in all (years where fracking) was happening. It's the old supply and demand. We received delivery of our first tank in two weeks and we were lucky to get the second one in six weeks. The supply and demand the additional cost $21,000.

This slide will show you the 18,000 gallon tank coming to the Broadway location and you can see the location on the right side of the slide where the tank will be lowered. The timeframe for the installation here we did this installation over the summer when school was not in session. The time to install was similar and actually a little faster than the first one because the distances to run electrical, fuel and other connections were shorter than at the Fremont yard.

Were there any challenges that came up during the design permitting the installation? The only challenge was the location of the tank. As you can see this is the finished product and it works like a charm. This photo was taken from the driveway where the tankers pull in. That's the fueling area right there for the tankers to make their delivery. This is looking from the opposite direction.

Here you can see the buses, the first few buses are back a little from the buses further down the line and you can see the same thing a little bit on the right hand side because the tank is right there right center where your - of the slide.

For a quick recap if you're a small district you're going to want to lease or buy 1,000 gallon tank let's say. A lot of small school districts have a tendency to buy from a local Circle K or gas station in the area and make a deal on the products and go in and fill up with diesel. This gives you the ability to provide your own fuel at a greatly discounted price even if you're buying in small quantities from the price you would pay for diesel.

If you're a large district for business and you want to buy in bulk you need to determine this based on your current fleet size and where it will be in the future and you have to run the numbers. The infrastructure of propane 18,000 gallon tank turnkey around $300,000 and it allows you to buy in bulk

Thank you very much. I appreciate the opportunity to be here.

DENNIS SMITH: Thanks everybody. Great presentations and a lot of useful information. Sandra or (Margaret) are you going to help us facilitate the Q&A since you can see those they come in?

SANDRA LOI: Can we open up the lines for questions?

COORDINATOR: Yes and thank you. We will now begin the Question and Answer session. If you would like to ask a question please press Star 1 and record your first and last name clearly when prompted. Your name is required to introduce your question. To withdraw your question you may press Star 2. Once again if you would like to ask a question please press Star 1. One moment please for our first question.

SANDRA LOI: Thank you while we're waiting we have a question from (Jeff Schroeder) on the online Q&A. And his question is, “Underground piping is made of” - he's asking, “What materials underground piping is made of and if it requires cathodic protection?”

CURTIS DONALDSON: This is Curtis it's Schedule 85 typically wrapped in most locations prefer wrap but it's Schedule 80. And it's always better to have cathodic protection on anything that you bury if you can if it's not too costly. It's not required because it's wrapped but certainly it's a consideration.

SANDRA LOI: All right thank you. Any questions on the phone line?

COORDINATOR: And at this time we have no questions in queue.

DENNIS SMITH: To all three of the speakers I didn't know if you might want to elaborate a little on some of the points as far as things that might cause the cost to go up and stations that people should be thinking about or, you know, that they should be smarter on their designs? I know we touched on some general things.

Obviously there's - if the stations are going to be located in certain areas where you know the cost of labor is higher near metro areas or I know we've also had situations where if they were going to install it in certain areas of California where there were special earthquake considerations that had to be taken into account that changes, you know, the size and the grade of concrete and everything else that can cause prices to go up.

And it has nothing specifically to do with propane with regular fuels you have to deal with those same issues. But still those are some kinds of things people need to consider if they don't have experience built on these stations. Any thoughts from the rest of you as far as things that you've run into? I know you touched on some permitting and other things but I didn't know if that was another topic that you had some tips or suggestions on.

ROBERT LITTLE: Yes this is Rob Little. You know, some of the things that you run into when you get into the 18,000 gallon installations that, you know, are very uncommon compared to 1,000, 2,000 gallon installations is you need to do things like bulkheads at the 18,000 gallon tank is above ground. You need a bulkhead which is basically with the transport vehicle you can pull up to for filling. You have to have peers that need to go a certain distance into the ground.

There's some site excavation and things like that that need to be done. And then you need to have a concrete slab. So I just quoted one project in Texas and as part of it we were requiring a 67 by 67 concrete slab so the vehicles could drive on and it could support the sensor and there's a pretty elaborate program but just the concrete alone was going to cost $50,000 to $60,000. So and that was reinforced with and everything.

But so as you can see those are some costs that you might not be planning for because you're not expecting them. With the smaller skid systems it's usually pretty simple as far as a lot of times you don't even need a concrete slap you can put them on asphalt and you can use the concrete or cinder blocks and things like that to host them on because those tanks aren't terribly heavy compared to when you getting those 18,000 gallons.

So if the project goes higher in volume and gallon store the projects are going to get more expensive which would be expected anywhere. And then Texas for instance there is a form where anytime you put in an 18,000 gallon tank you have to notify everyone that's in a 500 foot radius of that tank. I think it's called just a Form 500 to the Texas Railroad Commission. And then they have 30 days to respond to that to ask questions or to say they're not comfortable with it.

And then begins kind of the bartering back and forth to figure out and kind of educate them as to why it's still safe and why it's being put in. But those are a couple of things that can hold up the timing and also can add cost to it.

DENNIS SMITH: Another good best practice that needs to be considered no matter what kind of fueling you're putting in particularly if it's something new or different that hasn't been used locally is to be sure to communicate with local fire department who's closest who might be responding if there's any instance of the situation. And also obviously the permitting officials are going to have to approve it.

But get them involved early on to discuss what your plan is and then also, you know, those are the kinds of people to invite to your grand opening and other things so that they're comfortable and that they feel that they were consulted. And part of this and also, you know, they can plan accordingly if they need to get their people trained or acquire any kind of equipment for their first responders. It just works out much better rather than them being surprised at the end that this thing has been built without them being involved.

It's - they tend to be very good partners if you consult with them early enough and up front.

RON LATKO: This is Ron Latko. One of things that we took into consideration was keeping all the drivers and all the mechanics up to speed on what was going on at all times and making sure they had proper training way in advance. And any questions they had answered right away so that they were fully involved and engaged with the process throughout. It made a huge difference in their acceptance.

DENNIS SMITH: That's a good point because they obviously have a big influence on how well or how smoothly things go to begin with and the training will, you know, give them a better feel for expectations so that they're not surprised or don't really understand what's going to be coming.

RON LATKO: (But we get)…

DENNIS SMITH: …get - excuse me.

RON LATKO: …we get each one of them actually fuel a vehicle before the buses even arrive. We arrange for the propane vehicle to come. We arrange for them to learn how to use the dispenser and because the (nozzle) is a little bit different they needed to be familiar with how it was going to work and realize that it was an easy very, very simple and very similar situation to fueling with gas or diesel.

DENNIS SMITH: You know, that's a good suggestion because there's really, you know, only so much you can convey by doing it in the classroom. So if you actually get them out there and let them experience it and see what the thing feels like in their hand and then also if there were to, you know, the odor may be - is obviously different than with gasoline or diesel so that way it helps them understand what to expect and when there's a concern or something they need to report or is this what's just normal operating conditions?

Any other questions that have come in either online or in the queue?

COORDINATOR: Yes we do have a question from (Brian Park). Your line is open.

BRIAN PARK: Yes with an anticipated annual usage of somewhere in the 70,000 to 80,000 gallon range what would be the recommended tank size?

ROBERT LITTLE: Hey this is Rob Little with Pinnacle Propane. Seventy to 80,000 gallons I'd say you'd want a minimum tank size an absolute minimum tank size of 2,000 gallons but I would recommend at least a 3,000 gallon tank. And depending on your location and things of that sort compared to who your propane supplier would be. One of the things that I do is I take a - when I do consumption estimates I'll outline for my customers or for yourself for instance how many turns it'll be. And a turn is basically how many times we're on your property.

Now when I tell you a 3,000 gallon storage tank you're not actually able to get 3,000 gallons of propane in there and you never want to run completely empty. So my maximum delivery on a 3,000 gallon storage tank might be 21 hundred gallons. So if you're using 70,000 gallons and you get 21 hundred gallons per delivery you're looking at us being there at least 35 to 40 times a year maybe even a little more than that right.

So we're on your property almost once a week. And that's not a terrible operational risk it's when you get into needing people there every day or every other day that you run into operational risks just because if you get into inclement weather, if you get into a scenario where, you know, a tire blows out on a bobtail and there's not another one nearby or you're in the heart of winter and every propane company is busy and you want to make sure you have enough supplies built up.

And propane is flexible enough and inexpensive enough you can do that. So I always kind of outline those scenarios and try and recommend them. So I would say for you 2 - 2,000 gallon minimum 3,000 gallons would probably be more optimal.

BRIAN PARK: Thank you.

ROBERT LITTLE: Yes absolutely.

COORDINATOR: And there are no further question in queue at this time.

SANDRA LOI: We do have a few online. We have one that came in from (Jason Wang). “Are there any other special requirements for an underground tank other than the standard UST requirements?”

DENNIS SMITH: Do one of the panelist want to take a stab at that or is that something we want to get back and post online?

CURTIS DONALDSON: Can you restate that? I'm sorry.

SANDRA LOI: Oh sure…

CURTIS DONALDSON: This is Curtis.

SANDRA LOI: …yes no problem. “Are there any other special requirements for an underground tank other than the standard UST requirements?”

CURTIS DONALDSON: No just when you're ordering - and I apologize - when you order that tank you just have to let them know you're ordering an underground tank. The manufacturer will supply the tank prepared coded properly and everything to be installed underground. The only other consideration certainly is the cathodic protection. And then the pump and motor sizing and the placement of where the pump is because now you're pulling the propane out of the, you know, basically out of the ground because your tank is buried.

Certainly you're going to want to get with either someone like us or with your propane marketer. Typically we slow the RPMs down on the pump because we're now pulling the product and once we get it above ground then we're pushing it over to the dispenser. So there were a couple of considerations on how you actually install, where you install and what that pump motor configuration now looks like because the tank is buried.

DENNIS SMITH: And…

SANDRA LOI: …

DENNIS SMITH …I guess the point of clarification cathodic protection has been mentioned a few times not all the listeners may know what that means. But essentially that's an electronic system if you will that helps to protect underground tanks and pipeline systems like that to protect them from corrosion and then as part of that there's an ability to monitor them over time to see how the electronic system is doing and make sure everything is in order.

And depending on what you've got and conditions in some areas have different requirements there but as Curtis mentioned that's always a good system to have to give piece of mind you know what's going on and if that system's adequately protected. Any other questions online Sandra?

SANDRA LOI: …no we've covered them all.

DENNIS SMITH: Okay well I guess also was mentioned a couple of times was the White Paper, the additional materials that NREL is going to be posting on our Fuel Data Center Web site that has more details on some of these rule of thumb numbers on how you can if they're asking what fueling stations should cost or historically what we've seen them cost for different types of installations that will be available soon or do we already have that online now Sandra…

SANDRA LOI: It is already posted.

DENNIS SMITH: …okay. All right so that should be helpful to you as a companion to this Webinar and hopefully you've found this to be helpful today. Thanks again to all of the speakers. I think it's good anytime we can get this kind of experience in one place to help answer questions and to let people understand what's typical and what they can expect out there.

So often we hear stories about, you know, the one station that costs so much more than anything else they ever heard of and people don't understand what special considerations there were maybe in that particular situation. So this gives us a good handle on what to expect and what might cause some of the stations to cost different than others so.

CURTIS DONALDSON: Hey Dennis I'm sorry to interrupt before you close out a bunch of people have just typed in questions wondering what the Web site link address will be for additional info. Will you guys - will the DOE and Clean Cities be sending a follow-up email to the attendees and presenters to be able to go and kind of click that link and look at the recording?

SANDRA LOI: Yes we can certainly do that. We will plan to go ahead and follow up with everyone that participated on today's Webinar and send a long the link to the publication as well as (sites) of all the speakers are amenable and recording once that's made available.

CURTIS DONALDSON: Okay thanks.

SANDRA LOI: Good.

DENNIS SMITH: Okay was there anything else that came in at the last minute there?

SANDRA LOI: No it's just I was trying to jump in as well. So thank you for jumping in while - yes just folks are just asking about the site and a link to the White Papers. So we'll go ahead and send that out after the Webinar.

DENNIS SMITH: Okay thanks to the panelist and thanks to all that joined us. We extended the time a little bit more than the usual hour Webinar today because we knew this would be a great interest to everybody. So thanks again to everybody for participating. This concludes our Webinar for today. Bye bye.

COORDINATOR: This now concludes today's conference. All participants may disconnect at this time.