WINTER 2015

ARIZONA PETROLEUM MARKETERS ASSOCIATION

ARIZONA PETROLEUM MARKETERS ASSOCIATION

P.O. Box 44536Phoenix, AZ 85064

2015: Another Year of Changes for UST Owners and Operators 5PMAA Updates on RFS, Highway Bill and Safe Pipes Act 6-7Breakthrough to Excellence: APMA 2015 Conference Wrap Up 8-11

Get Some Sleep to Stay Safe on the Job 11What’s Killing Petro Buy/Sell Deals 12-13Luncheon Recap 14Save the Dates 15

2 WINTER 2015

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3FUEL MONITOR

CONTENTSVOLUME 8 - ISSUE 4

David Armstrong ...........Ballard Spahr Bill Aust ...... Biltmore Bank of Arizona Michelle Bloom ........Western Refining Alan Calvert ........................Calvert Oil Vallie Dodge ..............Knight Family CompaniesApryl Erekson .....Cochise CompaniesShawn Frate .................... Jackson OIl

Ron Gilley ................... Circle K StoresSteve Hallum .................... Hallum Inc.Bill Havard .......Wells Fargo Insurance Steve Kornman .....................SC FuelsTroy Little ................. Quik Mart StoresJess Miller .............Diamond Trucking Jami Moore .....HollyFrontier Companies

PresidentJason DavisArizona Fuel Distributors

Vice PresidentCameron TrejoTrejo Oil Company

Second Vice PresidentBill ChamplinRetired

Immediate Past PresidentLenora NelsonBennett Oil

TreasurerDave AlexanderCaljet

PMAA DirectorWarren LuethSenergy Petroleum

ADVERTISERS

Cochise Companies ............................16

HollyFrontier Companies .......................7

PMMIC Insurance ..................................2

Western Refining .................................14

APMA’S PURPOSESAPMA’s primary purpose is to protect and advance its members’ legislative and regula-tory interests in Arizona and Washington, D.C. APMA’s secondary purpose is to provide mem-bers with business and social functions. These include an annual conference, workshops, sem-inars and industry speakers. APMA holds two golf tournaments – one benefitting the APMA Scholarship Foundation and the other in con-junction with the annual conference. In addition, APMA holds monthly membership meetings as well as various association committee meet-ings. APMA is a member of the Petroleum Mar-keters Association of America.

To advertise, contact the APMA Fuel Monitor Committee at fuelmonitor@apma4u.org.

Articles and other contributions to this publication are the sole opinion of the author or contributor and are not to be interpreted as the work or opinion of the APMA. Indeed, APMA provides no warranty or representation concerning the accuracy of articles or other contributions to this publication and hereby expressly disclaims the same.

Arizona Petroleum Marketers AssociationP.O. Box 44536 • Phoenix, AZ 85064

PH: 602.330.6762 • FAX: 602.391.2817E-mail: Amanda@APMA4u.org

www.APMA4u.orgAPMA Fuel Monitor

is published by Cereus Graphics2950-2 East Broadway Rd., Phoenix, AZ 85040

cereusgraphics.com

APMA’S OBJECTIVES• Encourage members to be actively engaged

in association activities and legislative grass-roots efforts

• Provide resources for education, training and the exchange of ideas

• Encourage members to maintain high busi-ness ethics and a positive image for the in-dustry

• Advise and educate membership to enable them to run their businesses effectively and profitably

APMA Board of Directors

APMA Executive Committee

Get Some Sleep to Stay Safe on the Job 11

What’s Killing Petro Buy/Sell Deals 12-13

New Member Spotlight 13

Luncheon Recap 14

Save the Dates 15

Letter from the President 4

Message from the Executive Director 4

2015: Another Year of Changes for UST Owners and Operators 5

PMAA Updates on RFS, Highway Bill and Safe Pipes Act 6-7

Breakthrough to Excellence: APMA 2015 Conference Wrap Up 8-11

Cover photo:Sunset over the Phoenix Mountain Preserve.

Happy New Year!It’s hard to believe we have

closed the books on 2015 and are already underway in 2016. I am very appreciative of the work that has transpired over this last year and look forward to even more progress as we build upon the momentum that has been es-

tablished over the past few years. We have enjoyed some great success in the political realm and look to continue to be a strong voice for our industry moving forward.

This New Year presents several great opportunities to get involved in the Association and by so doing, expand your own personal network and even create opportunities to grow your business. Please look for ways to become

more involved in the committees and fundraising events; it is rewarding work and there are so many awesome people involved in our industry here in this great state of Arizona! If you are looking for ideas, reach out to either myself or Amanda.

A listing of our events is found in this edition of the Fuel Monitor on page 15, and is also available online at www.apma4u.org. Mark your calendars and plan now to attend.

I appreciate all that you do, and look forward to the exciting year ahead.

Jason Davis

WINTER 20154

Letter from the President

Message from the Executive DirectorI have heard that lobbyists are the people you hire to

protect you from the people you elected. Over the years I have represented the fuel industry at the Arizona Capitol, I have found that the most effective influencers of public policy decisions are constituents, also known as, YOU!

My challenge to each of you is that, before the 2016 Ar-izona Legislative Session opens on January 11, you iden-tify your two Representatives and one Senator (instructions available on the members only page at apma4u.org) and contact them. Tell them a little about yourself and your business.

If you already know your elected officials, check in to say hello and update them on what is new.

It is better not to be the person who only calls on your representative when the dire and dreaded bill comes up for a vote or when we need support on essential legislation.

Even if you are an employee and not a business owner, the actions of the state legislature will impact your com-pany and, in turn, you. You can be an advocate for your industry. APMA is here to help.

During the legislative session, you will see “APMA Call to Action” emails along with legislative updates in APMA News Review emails, keeping you informed and some-times asking for your help in reaching out to legislators about specific issues.

APMA will always give you background information on the issue at hand as well as a template for communications.

Most importantly, we will always identify an “ask”. Your assistance on calls to action is so important.

APMA is proud to report that the association will be represented again this session by Mike Williams from Williams and Associates as well as myself. We will be advocat-ing for APMA’s legislative priorities and keeping an eye out for any adverse bills that need to be defeated.

Be sure to check out the monthly luncheon meetings during the first quarter of 2016, where we will provide in-formation and answer questions about legislative issues.

Is your curiosity piqued about legislative activity? AP-MA’s Legislative Committee meets about once a month during session and provides a great way to learn more about and weigh in on top issues at the Capitol.

Hoping we will see you early and often in 2016!

Best regards,

Amanda Gray

Jason DavisPresident

Amanda GrayExecutive Director

5FUEL MONITOR

2015 was a significant year for UST owners and opera-tors. Important new state laws were enacted by the state legislature in HB 2636, and new EPA regulations became effective in October.

HB 2636 made many changes and they can be viewed more completely on the ADEQ or legislative websites listed at the end. A few of the more significant changes are dis-cussed here. ADEQ looks forward to working together with Arizona owners and operators to make the new programs successful.

Previous time-barred claims. The bill provides an-other chance for claims that were previously expired to be presented again. There are 2 categories. The first category is for releases reported to ADEQ before July 1, 2006, and the second for releases reported from July 1, 2006 to De-cember 31, 2015. In both categories, claims can be sub-mitted for corrective action costs incurred after June 30, 2010 until the end of 2015, if the facility was eligible for reimbursement as of June 30, 2010. 90% of eligible costs can be reimbursed up to a total of $1 million for facilities with insurance, and 90% of eligible costs up to a total of $500,000 for facilities with other financial responsibility mechanisms.

Once ADEQ has claims processors in place, work will begin on the first set of time-barred claims, all of which must be paid before the second set is paid. Compliance with financial responsibility is required to receive reim-bursement.

Insurance. New insurance provisions were enacted that are designed to make an owner or operator’s liability insurance work more effectively. One of the most impor-tant is a requirement to continue existing policy retroactive dates with 2 exceptions. Beginning this year, policies must have retroactive dates corresponding to the tank installa-tion date, a baseline assessment, or the previous policy’s retroactive date to be compliant. In upcoming years, this will mean that the money spent on premiums will more likely result in coverage when the exact date of a release can’t be confirmed. ADEQ hopes to begin optional baseline assessments as soon as possible to determine the envi-ronmental condition of a UST facility at a set point in time. This will facilitate coverage and allow insurance to work to its full advantage. Department assistance with claims will also be provided.

Grant program. A grant program will begin for the following “noncorrective actions”: tank upgrades, tank re-moval, release confirmation, and baseline assessments. Working with actuarial data, data from other states and a financial contractor, ADEQ is developing a system to rank applications based on the risk of a tank system leak and

the estimated environmental harm in combination with the applicant’s financial resources.

A new function in the State Lead program will similarly rank and provide most of the same noncorrective actions with a state managed contractor when a financially able owner can’t be found.

Funds for release cleanup. The new fund is not the SAF, and not a financial assurance mechanism. Monies for corrective actions will be disbursed either through a pre-approval process or through the Department’s contractor managed process in State Lead. In the preapproval pro-cess, small owners (owning less than 20 UST facilities) will be given priority with preapproved funds for these small owners immediately encumbered and given priority in each annual allocation. Preapproved amounts for those who own 20 or more facilities will be paid if funds are available in the annual allocation. Facilities must be pursuing a claim against their financial assurance mechanism to be eligible for reimbursement.

EPA regulations. On October 13, 2015, the U.S. EPA revised their 1988 UST regulations. The new federal regu-lations added secondary containment requirements for new and replaced tanks and piping; periodic operation and maintenance requirements for UST systems; new release prevention and detection technologies; operator training requirements; updated codes of practice; and addressed UST systems deferred in the 1988 UST regulation. Com-pliance dates for the federal UST regulations range from October 13, 2015, to April 11, 2016, to October 13, 2018. In general, USTs must comply at the appropriate times with both the new federal and the current state UST regulations because Arizona does not have State Program Approval from EPA.

ADEQ has examined the new federal regulations and can provide assistance and guidance. Changes may be necessary to make ADEQ rules conform to the federal reg-ulations.

What’s in store for the years ahead? The penny per gal-lon tax is scheduled to end in 2023. Baseline assessment are scheduled to be conducted until then. All time-barred claims should be paid before 2023. ADEQ is ready to work with APMA to help tank owners and operators prepare for a future guaranteed to keep us all on our toes.

New program description, ADEQ website: http://www.azdeq.gov/environ/waste/ust/index.html

HB2636 (Chapter 247), legislative website: http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/52leg/1R/laws/0247.htm&Session_ID=114

2015: Another Year of Changes for UST Owners and OperatorsBy the Arizona Department of Environmental Quality

6 WINTER 2015

PMAA Updates on RFS, Highway Bill and Safe Pipes ActBy Bradley Norman, PMAA

RFSOn December 1, the EPA is-

sued a final rule which sets the Re-newable Fuel Standard (RFS) blend-ing mandates for years 2014, 2015 and 2016. The RFS is important to petroleum marketers because it ul-timately determines whether E15 gasoline is mandated to meet an-nual refiner blending mandates. The existing RFS ethanol blending mandates have already pushed E10 blends into virtually every gasoline

market in the country. Any significant increase in the ethanol blending standard will force refiners to move to E15 blends unless gasoline demand rises to offset new blending mandates. The EPA was under court order to finalize the multiple year standards no later than today. That order is based on a court approved agree-ment between the EPA and refiners designed to get the long over-due standards back on schedule.

Below are the final blending volumes for 2014-2017

Final Renewable Fuel Volumes 2014 2015 2016 2017 Corn Ethanol (billion gallons) 13.61 14.05 14.5 n/a Cellulosic biofuel (million gallons) 33 123 230 n/a Biomass-based diesel (billion gallons) 1.63 1.73 1.90 2.00Advanced biofuel (billion gallons) 2.67 2.88 3.61 n/a Total Renewable fuel (billion gallons) 16.28 16.93 18.11 n/a

The new biofuels blending volumes for 2014, 2015 and 2016 are not expected to require the introduction of E15 gasoline. PMAA is opposed to volumetric ethanol blending mandates for gasoline that would require the introduction of E15 until all practi-cal and legal UST compatibility issues are settled for petroleum marketers. PMAA advocated this position to the EPA via written comments and public testimony. PMAA also recently met with the White House Office of Management and Budget to express the industry’s concern over a possible E15 mandate should ethanol blending levels be set too high in this round of annual renewable fuel blending requirements.

Sixty percent of the gasoline stations are single-store owned and the average cost to retrofit a gasoline station with E15 com-patible equipment is $200,000 which would increase pump prices and force many retailers, especially in rural areas, to close. Addi-tionally, lucrative RIN values WILL NOT lure retailers into compat-ible infrastructure investments to sell higher level ethanol blends. Most retailers do not have the ability to participate in the RINs market since nearly 95 percent of all gasoline that passes over the terminal rack is already pre-blended with ethanol and no longer generates RINS. This leaves retailers with few viable options to invest in upgraded infrastructure.

The Agency has been under intense political pressure from both the refiners and renewable fuels industry over whether an E15 gasoline mandate is a viable remedy to overcome the RFS blend wall. EPA’s acknowledgement that there are constraints in the motor fuels market to accommodate increasing volumes of ethanol including concerns related to retail infrastructure compat-ibility was justification to lower the ethanol mandate compared to the statutory levels set by Congress in 2007.

Meanwhile, EPA requires 1.9 billion gallons of biodiesel for 2016 and 2 billion gallons for 2017. PMAA has no concerns over the biodiesel mandate because it supports BioHeat®, which at a 12 percent blend coupled with ultra-low sulfur heating oil (ULSHO), is cleaner than natural gas.

Highway BillOn December 3, the House and Senate overwhelmingly

passed a bipartisan five-year, $305 billion highway bill known as the Fixing America’s Surface Transportation (FAST) Act. The President signed the legislation on December 4. Congress has not been able to pass a long term highway bill in nearly a de-cade, making this a significant first victory for the new Speaker of the House, Paul Ryan (R-WI). In addition to setting funding lev-els for highways, transit, passenger rail and bridge programs, the FAST Act revives the expired Export-Import Bank. The legislation doesn’t include a gas tax increase.

The highway bill contains many provisions that are important to marketers. The provisions are outlined below:

Withdraws PHMSA’s Wetlines Proposed Mandate for Good

On January 27, 2011, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a proposed rule regard-ing the transportation of gasoline in the external product piping (wetlines) on cargo tanks transporting flammable liquids. The proposed rule limited the amount of gasoline in each wetline to one liter. Transports usually have four wetlines – one per com-partment. The proposed rule gave tank truck operators 12 years to retrofit existing tanks with bottom protection like steel rails or install purging equipment, and any trailer manufactured two years after the date of regulation would have to be equipped with in line purging devices or steel guard rails to shield the wetlines from

impact. PMAA led efforts to oppose the proposed rule and we are

pleased the bill withdraws the 2011 wetlines proposed mandate. In the 2012 Highway Bill, PMAA saved marketers a minimum of $8,000 per transport by asking Congress to include a provision which prevented DOT from arbitrarily adopting a wetlines man-date until a Government Accountability Office (GAO) report was completed. In September 2013, the GAO cited that DOT did not have adequate information to determine whether a wetlines de-vice mandate was necessary to improve safety. The Highway bill puts an end to the 2011 wetlines mandate permanently.

Safety Data Postings/FMCSA’s Compliance, Safety, Accountability Program (CSA)

In a significant step forward for petroleum marketers, the highway bill requires DOT to commission a study on the accu-racy of the CSA program and take steps to address problems in identifying risk and the use of crash data where a motor carrier was free from fault. Until the study and corrections are complete FMSCA would have to take down its safety scores for trucks and motor carriers.

Earlier this year, the Government Accountability Office (GAO) issued a critical report on the quality of the safety data used by the DOT to determine motor carrier safety. The GAO found that

(Continued on next page)

7FUEL MONITOR

Jami MooreSW Regional Manager480-256-1992jamimoore@hollyfrontier.com

Mike HardySW Marketing Representative480- 256-1986michael.hardy@hollyfrontier.com

PMAA Updates on RFS, Highway Bill and Safe Pipes Act (Continued from previous page) By Bradley Norman, PMAA

the safety data collected is not a reliable predictor of motor carrier safety. The CSA program uses data from enforcement activity, roadside inspections and accidents involving commercial mo-tor vehicles to set individual motor carrier safety scores, which in turn are used to establish a predictive crash risk. Motor carriers with a predictive crash risk over a certain threshold are targeted for FMCSA intervention. Intervention begins with an initial warn-ing letter followed by closer FMCSA oversight including targeted roadside enforcement and investigative safety audits. Carriers with the poorest safety ratings can be ordered out of service by FMCSA. The GAO report criticized the CSA data saying that of the 800 violations included in the motor carrier risk model, only two - speeding and failure to wear a seat belt, were reliable predic-tors of crashes. In addition, the CSA model was criticized for not including a sufficient amount of data on all carriers to establish a baseline risk for crashes. As a result, many motor carriers with no history of crashes have received a high predictive crash rate.

Safe Pipes Act with PMAA Placarding SectionOn December 9, the Senate Committee on Commerce, Sci-

ence, and Transportation unanimously passed a bipartisan bill known as the “SAFE PIPES Act”, marking a significant victory for PMAA and its members. The bill seeks to improve the safety of the nation’s oil and natural gas pipelines and overhaul procedures at the Pipeline and Hazardous Materials Safety Administration (PHMSA).

Included in the bill is language that was initially requested by PMAA. Section 4 of the bill is language that rescinds a re-cent interpretative guidance on placarding on cargo tank trucks. The language would force PHMSA to revert back to placarding to the lowest flash point for both split loads and alternating straight loads of diesel fuel and gasoline. This is a cost saving provision for marketers because they can ship diesel fuel, gasoline and heating fuel in different compartments of the same cargo tank vehicle under a gasoline placard, as well as ship straight loads of gasoline or diesel under the gasoline placard instead of affixing or switching multiple product placards. The provision can also benefit emergency responders because it reduces the number of placards on the cargo tank which makes identifying the appropri-ate response in an emergency simple and reliable.

PMAA has worked with the Department of Transportation (DOT) since the interpretative guidance was released in June which required different placarding for straight loads of gasoline and diesel.

Members of the House Transportation and Infrastructure Committee and Senate Commerce, Science, and Transportation Committee have been reaching out to the DOT since October re-garding this issue. Since then PMAA worked closely with the staff of Senator Deb Fischer (R-NE) to ensure the language would be added in the “SAFE PIPES Act” and that it would receive support from other committee members.

8 WINTER 2015

APMA had a hugely successful conference with great attendance, phenomenal networking events and outstanding educational sessions. Hope you did not miss out this year! The confer-ence moved back to Tucson at the Omni Tucson National Resort on September 27-29.

Welcome ReceptionThe event opened on Sunday evening, Sep-

tember 27, with a welcome reception themed “Way Out West” at the Mesquite Gulch, an old West venue onsite. Attendees played lawn games, enjoyed Southwestern fare and listened to (you guessed it!) country tunes.

Educational SessionsOn Monday, September 28, APMA Executive Director

Amanda Gray started the educational meetings with an as-sociation update. Then Bill Aust, APMA Director and Senior Vice President at the Biltmore Bank of Arizona, led a Cyber Security panel discussion. Panelists were true experts of the field, including Jonathan Fairtlough from Kroll (a data security breach expert), Martin Hellmer from the Federal

Bureau of Investigations (investigator) and Jim Knapp from the US Attorney’s Office (prosecutor). Next up, PMAA 2015 Chair Grady Gaubert from Gaubert Oil in Thibodaux, Loui-siana, gave an overview of top federal issues and changes for the national federation and PMAA PAC Co-Chair Mi-chael Fields from the South Carolina Petroleum Marketer’s Association gave a presentation on the importance of po-litical action committee giving.

Breakthrough to Excellence: APMA 2015 Conference Wrap Up

9FUEL MONITOR

Breakthrough to Excellence: APMA 2015 Conference Wrap UpAttendees then selected one of three breakout meet-

ings to attend. Their options included Price Risk Manage-ment: Successful Hedging Strategies with Deborah Neal from World Fuel Services; or The Vanishing Trucker: Strat-egies to Locate and Keep Commercial Drivers with Michael Hayes from Momentum Specialized Staffing; or UST Pro-gram and Legislative Session Review with Amanda Gray from APMA.

Following the breakouts, attendees reconvened for a working lunch including an industry Back to Basics panel. Lenora Nelson from Bennett Oil and American Transport,

Doug Johnson from Western Refining, and Kevin Hogan from UPT joined moderator Michelle Bloom, APMA Direc-tor and Conference Chair. Panelists discussed important issues and challenges in their industry area.

Monday evening, dueling pianos entertained the crowd during the networking reception and signature dinner. APMA President Jason Davis from Arizona Fuel Distributors presented Jess Miller from Diamond Trucking and Michelle Bloom from Western Refining Wholesale with appreciation awards for their outstanding efforts on the Scholarship Golf Tournament and Conference, respectively.

Golf OutingGolfers played the Tucson National’s

Catalina course on Tuesday morning and the conference closed with a Golf Awards Lunch.

10 WINTER 2015

APMA 2015 Conference Wrap Up (Continued from page 9)

(Continued on next page)

FUEL MONITOR 11

Get Some Sleep to Stay Safe on the Job

Tod L. DennisAssociation Coordinator

CopperPoint MutualInsurance Company

Sleep is a crucial part of health and well-being, but some workers may not be getting an adequate amount of sleep, which may affect their productivity. Sleep deprivation may have a detrimen-tal impact on work performance lead-ing to situations that could compromise safety in the workplace.

Three of every four workers in the United States acknowledge they were “tired” for most of the days of their work week, according to a survey by the Vir-gin Pulse Institute.

Sleep deprivation may cause dif-ficulties concentrating on the job, increasing the chance of safety incidents and reducing their engagement and attention throughout the day, the survey’s results show.

“Showing up to work sleep deprived can be the equivalent of showing up to work intoxicated,” said Dr. Jennifer Turgiss, director of the Virgin Pulse Institute and co-author of the study. “Employees who don’t sleep well have poorer concentration, poorer decision-making abilities, are significantly less able to cope with stressful situations and are more likely to make unhealthy choices.”

Employees in occupations where they work long hours may ben-efit from their employers addressing the risk factors of fatigue in the workplace, according to a study on fatigue risk management published in Journal of Occupational & Environmental Medicine (JOEM).

In jobs where safety is dependent on being alert, employers may want to find ways to reduce fatigue before it becomes a safety issue. Risk factors of fatigue may result in financial losses of more than $1,960 per employee annually in lost productivity, the article stated.

Here are three major risk factors connected to sleep depriva-tion, according to the Journal’s story:

• Motor vehicle crashes in the early morning. The article noted workers often are at risk for fatigue-related incidents in the early morning hours as this time period is when a per-

son’s circadian rhythm reaches a period of peak sleepiness. While some workers who work long hours or night shifts may not feel affected by sleep loss, employees may want to be cautious about the potential for motor vehicle crashes if staff members are behind the wheel after working an ex-tended or late shift.

• Chance of errors increase after long shifts. In addition to motor vehicle crashes, the study suggests workers who work more than 24 hours have twice as many attention fail-ures and a 36 percent higher chance of making significant errors. For instance, employees may have an increased risk of incurring an injury from handling sharp objects or running machinery.

• Chronic medical conditions linked to sleep loss. Employ-ers may want to be aware of chronic medical conditions that are connected with lack of sleep. When workers do not get enough rest the night before, they have a higher chance of developing health problems, such as diabetes, cardiovas-cular disease and obesity-related health effects.

Employers may consider establishing workplace safety pro-grams that concentrate on addressing employee fatigue, accord-ing to the Virgin Pulse Institute.

“Our study made one thing clear: lack of sleep is crippling America’s workforce,” Trugiss said. “Employers can’t turn a blind eye. Whether they offer an online sleep program, encourage em-ployees to use vacation days, or provide other tools, employers must address sleep issues in order to create a thriving workforce and business.”

By participating in these programs, employees may become more rested and feel as though they are valued and supported by their employers. This is an impor-tant aspect in encouraging workers to increase their performance and engagement in and out of the work-place, according to Turgiss.

Golf Tournament Winners

Men’s Long Drive: Kevin Hogan, UPT. Not Pictured: Women’s Long Drive: Trish Hales, NGL and Closest to the Pin: Denise Anderson, Circle K.

Second Place Team: Dan Wilson, NW Tank Lining & Inspections. Not Pictured: Cameron Leipart, Continental Tire and Jonathan McNeely, Tank Tech.

First Place Team: Colby Stringham, Shell; Jason Davis, Arizona Fuel Distributors; Bill Aust, Biltmore Bank of Arizona

Plenty of prizes for the raffle.

12 WINTER 2015

Even marketers with a track record of acquisitions are starting to hit some snags they didn’t anticipate. What’s hap-pening? What has changed? If buyers want to buy, and sellers want to sell, what is keeping happy marriages from taking place?

Over the past 12-18 months, I’ve witnessed the proliferation of six common deal-killers undermining buyer/seller relationships. Just understanding these new dynamics in the marketplace will allow you to rethink your strategy and progress more smoothly on your next transaction, but the suggested ac-tion for each will turbo-charge your success.

Deal Killer #1 — Window Shoppers. Buyers who say they want to buy, may actually believe they want to buy, but have not made any offers are eroding trust in the mar-ketplace. We’ve even witnessed marketers whose true de-sire is to sell and have no intentions of buying, pose as buyers. They just wanted to see what is happening to know if the timing is right for them to pull the trigger. While I un-derstand their desire, it’s not a forthright way to gain intel-ligence.

Why does it matter? It matters because as this pat-tern proliferates, buyer trust is eroded. A seller is putting his heart, soul and generations of family work on the line. Because of window-shoppers, even a trust-worthy buyer must now prove their sincerity.

Suggested Buyer action — Only ask for details on trans-actions you REALLY WOULD BUY! Then express your sincerity to the seller on why their transaction would be a good fit, including being upfront and honest on any possible hurdles that could keep you from proceeding.

Suggested Seller action — Ask how many acquisitions the buyer has actually closed on, why your company interests them, how it fits into their strategy, their tim-ing on closing, etc. (At Meridian, when we share offers with a buyer and have two or three non-actions in a row, or feel their excuse for not making an offer is bo-gus, we stop calling them for deals.)

Deal Killer #2 — Guerilla Competitor. In an industry where you go toe to toe on margins and service, it’s a very emotionally difficult leap to sell to a close big competitor. In fact it’s so difficult, that many marketers exclude direct

competitors from their buyer pool. Why? Mainly it’s fear the competitor could back out of the deal last minute after get-ting complete margin and customer information in hand, later squashing the seller in the marketplace like a bug.

Suggested buyer action — When you know in your heart of hearts it’s a transaction that makes sense, of-fer sizable, non-refundable escrow money up front to show your sincerity.

Suggested seller action — Don’t let the Hatfield/Mc-Coy mentality keep you from a successful transaction as long as there is a reasonable culture fit. Insist on an escrow, honestly explaining your concerns.

Deal Killer #3 — Unrealistic Seller Price Expecta-tions. Deals have to make sense economically for sellers and cash flow is what finances acquisitions. Sellers, on the other hand, see years of hard work, a loyal customer base built over those years, a lot of cash sunk into real estate, trucks, plants, etc. If the business profit plus depreciation has waned over the years, the business simply won’t pro-duce the cash needed to pay for all those assets. Sad but true.

Suggested buyer action — If a seller names a price, tell them what you would need that business to produce annually to support that price and then ask them how they see that happening. Enlist their help so if there is something you aren’t seeing, you can possibly raise your price. If they realize it’s not going to happen, they might lower their price.

Suggested seller action — Engage a professional petro business valuation service like Meridian so you know the discrepancy between your number and the market number up front and can prepare. We often work with sellers for two to three years helping them create more profit which comes back usually five-fold upon sale. For instance, getting profit up $500K annually will put $2.5 million in your pocket!

Deal Killer #4 — Buyer Reputation. As a buyer, you love your business, think you do things right, treat people fairly, have a great culture, etc. The trouble is, what you think doesn’t much matter. It’s what the marketplace thinks of you and more specifically, a potential seller. Buyers earn reputations, good or bad, based upon rumor or hearsay. It may be accurate, it may not be. Doesn’t matter. It just is what it is.

What’s Killing Petro Buy/Sell DealsBy Betsi Bixby, Meridian Associates

13FUEL MONITOR

Suggested buyer action — Don’t let your ego keep you from being in touch. Ask your supplier rep what people say about you. Ask fellow jobbers. Knowledge of even untruthful negatives is power. Why? You can use that marketplace perception in your negotiations, tackling it head on. For example, have a reputation for extended negotiations and long overdue closing dates? Disclose that to your buyer, tell them about your processes and timing, tell them you are slow and here’s why. Truth gets respect. Have a negative that isn’t true? For ex-ample, “there is a rumor that we lose customers when we make an acquisition because of our terms. Let me tell you exactly what happens (or happened with last deal) so you can be comfortable your customers will be treated fairly.”

Suggested Seller action — Do not exclude any seller based on rumor or expectation. For instance, let’s say you’ve heard XYZ Petro is a low-ball bidder and never buys anything. Have a frank discussion with the owner. “I’ve heard you make a lot of offers in the marketplace that are far below what sellers want and therefore have made very few acquisitions. I’d like to understand your pricing model before we both waste valuable time. Could you help me to understand how you price?”

Deal Killer #5 — Customer Attrition Perception. I was once talking with a marketer who said when they did a lube acquisition; they used a 25% fall off rate in customers. That had been their actual experience so their pricing model re-flected this drop off. Should that be the actual experience? Absolutely not. We’ve handled many deals where the re-tention was in the mid to high 90’s! Interestingly enough, a company who has trouble with post-acquisition retention will try to build in volume retention in their pricing. In well handled transitions, volumes stay and even grow.

Suggested buyer action — If you have a repeated pat-tern of customer fall out on prior deals, ask yourself why that happened. Did you not plan for the transition well? Was there a marketplace perception of poor customer service (and if so, is it true?) Did you change pricing or terms? Did you keep primary sales and customer contacts or did you try to centralize too soon? In other words, take responsibility for your attrition and get to work on fixing it! It’s your problem, not the seller’s.

Suggested seller action — Inquire about prior acquisi-tion attrition. Get straight answers and confirmations. Never accept a volume retention payout from a com-pany with a bad track record.

Deal Killer #6 — Surprises. During and after transaction surprises run the gamut from unknown environmental situ-ations to missing equipment and tanks to surprise employ-

ee exits to financials that don’t match up or make sense to industry shifts. When a buyer submits an offer, he is hoping and praying that what he thinks will happen over the next five years turns out to be correct! With some marketers, a single bad surprise gets them gun shy and overly risk averse on subsequent possible transactions making the due diligence process painful for the seller. And in some instances, the financial team is driving the due diligence and misses the entire people and culture side of the trans-action. If you don’t mesh cultures, people will quit and the transaction will fall apart.

Suggested buyer action — Have a realistic due dili-gence process that you would be willing to submit to yourself. Keep your process streamlined and as prac-tical and non-onerous as you can make it. Remem-ber that culture trumps numbers. People will make or break you. Most owners care as much about their team as they do the cash.

Suggested seller action — Ask the buyer about past surprises. Ask about the due diligence process. Ask about culture. Visit the potential buyer’s home office to experience the culture for yourself. Inquire about per-sonnel turnover rates in all key areas as part of your initial discussions.

In summary, the marketplace is wary right now on both sides since so much consolidation has taken place. The naivety that once existed is gone. But in the midst of this new age of distrust, we at Meridian are still making happy marriages, bridging that perception gap between buyers and sellers. If we can assist you on either side of the table, please let us know!

Since 1991, Meridian has provided insight and services to over 3,400 petroleum marketers, growing and expanding their market share, while increasing their cash flow and prof-its. Being the leading petro valuation provider in the nation, Meridian is also trusted for buy/sell transactions. To find out what Meridian can do for you — Call us 800-728-9005.

Keith OmuraC Mart Technologies

KeithOmura@CMartTechnologies.com

916-396-5794

C Mart is an associate member specializing in convenience and grocery store point of sale technology and equipment.

New Member Spotlight

14 WINTER 2015

US Congressman Paul Gosar spoke at the APMA October Monthly Luncheon at the Phoenix Country Club on Tuesday, October 20.

Representative Gosar covered the House of Rep-resentatives leadership race, impeachment as a tool for change, the critical importance of a new bud-get and answered member questions.

Luncheon Recap On Tuesday, November 17, the

Department of Weights and Mea-sures Environmental Programs Man-ager Michelle Wilson gave attendees at the APMA monthly luncheon sev-eral important updates.

First, she addressed the upcom-ing and ongoing transition of Weights and Measures to the Department of Agriculture. Second, she updated the group on the process for Stage II vapor recovery decommis-sioning and alternative decommissioning plan requests, which are due by December 31, 2015. Third, she covered biodiesel labeling issues that have come up for retailers across the state.

On Tuesday, December 8, APMA hosted its holiday luncheon at the Phoenix Country Club. Tom Norris from PMMIC presented on Under-standing Underground Storage Tank Insurance. Ken Bennett, former APMA Director and Arizona Secretary of State and current Congressional Dis-trict 1 Candidate, spoke about understanding the federal budget and national debt. Nathan Weam-er, from Core Health and Wellness, got the crowd on their feet for a Stretch to Prepare lesson.

15FUEL MONITOR

2016

Save the Dates

APMA Scholarship Foundation Golf Tournament April 14 at McCormick Ranch Golf Club in Scottsdale, Arizona

PMAA Washington Conference and Day on the Hill May 18-20 at the Marriott at Metro Center in Washington, DC

APMA Annual Conference and Golf Tournament September 11 – 13 at the Hilton Sedona at Bell Rock and Sedona Golf Resort in Sedona, Arizona

PMAA Fall Meeting at the NACS Show October 17-18 at the Hyatt Regency Atlanta in Atlanta, Georgia

Monthly Luncheons and Meetings January 19 at the Phoenix Country Club

February 23 at the Phoenix Country Club

March 15 at the Phoenix Country Club

April 19 in Tucson, Arizona

May 10 at the Phoenix Country Club

June 21 at the Phoenix Country Club

July 19 at the Phoenix Country Club

October 25 at the Phoenix Country Club

November 15 at Phoenix Country Club

December 13 at Phoenix Country Club

ARIZONA PETROLEUM MARKETERS ASSOCIATION

16 WINTER 2015

COCHISECCBUILT TO LAST