Colorado Preps for Lined UST Inspections
ConocoPhillips Reorganizes
Kinder Morgan to Increase Capacity
Gubernatorial Candidate Says Oil Companies Are Gouging
Colorado Allows "Outside" Calibration
7-Eleven Offers New Slurpee Options

COLORADO PREPS FOR LINED UST INSPECTION

SNOWMASS, CO. — The state of Colorado is preparing to inspect all lined underground storage tanks in the state.

Dick Piper, director of Colorado Department of Labor & Employment, division of Oil and Public Safety, Denver, CO., explained, "10 years ago, many of you installed lining in your steel USTs to come into compliance with 1992 regulations. You may also remember that there is a 10-year inspection requirement and after that it requires 5-year periodic inspections.

"We don't know when many of the tanks were lined," Piper continued. "Therefore, as of January 1, 2004, we're sending a letter to owners regarding lining installation date. We're going to ask when the lining was installed. If we don't know or don't get an answer, we'll assume that the 10 years are up and the inspection is due."

Piper said that Colorado will be requiring either a visual inspection of each lined tank or a recently approved alternative.

"We have approved an alternative to visual inspections of lined tanks," said Piper. "We have borrowed from many national standards looking for an alternative to human entry internal inspections. We have taken a portion of the ASTM standard which involves video camera internal inspection in conjunction with a computer model that can predict leak probability based on internal corrosion. It requires quite a bit of site-specific data regarding the composition of soil to create the model."

More information on the UST inspection requirements is available at the division website at www. oil.cdlc.state.co.us/

CONOCOPHILLIPS REORGANIZES

HOUSTON, TX. — ConocoPhillips has announced that it will be reorganizing its downstream operations, effective as of Oct. 1.

Of major interest to Western branded marketers and dealers, Mark Harper, the president, Wholesale Marketing, will assume responsibility "for the retail stores that are retained by ConocoPhillips." Harper will become president of U.S. Marketing, with responsibility for both wholesale and retail marketing.

ConocoPhillips is currently negotiating the sale of an undisclosed number of its Circle K convenience stores as well as many of its branded service stations across the country.

The major oil noted that Dave Holthe, currently the president of Retail Marketing, "will continue to lead the organization associated with the large retail disposition currently under way and will leave ConocoPhillips at the close of that transaction."

The ConocoPhillips also said that after they "sell a substantial portion" of their marketing assets "and exit certain geographic markets," they will consolidate the company's wholesale and retail marketing functions.

Two of the major oil company's leaders — Tom Nimbley, president of U.S. Refining, and Richard Severance, senior vice president, Strategy, Optimization and Business Development — has elected to retire at the end of the year. Each has logged more than 30 years of service to the major oil company.

In the new structure, U.S. Refining will now have two leaders, who will both join the Downstream Leadership Team. The operational General Manager roles in U.S. Refining will be eliminated, resulting in the removal of that layer of management.

Larry Ziemba, who had been serving as general manager, Refinery Services, U.S. Refining, will become the new president of Central/West Coast Refining.

Willie Chiang, who had been serving as general manager, Western U.S., Refining and manager of the Rodeo Refinery, will become president of Strategy, Integration and Specialty Businesses.

Carin Knickel, the president of Specialty Businesses, will become vice president of Human Resources, reporting to Jim Mulva, president and CEO.

KINDER MORGAN TO INCREASE CAPACITY

TUCSON, AZ. — Looking for an opportunity to improve supply to the Phoenix valley, Kinder Morgan Energy Partners says it will increase the size of its Eastern pipeline into Phoenix.

After the rupture of the Phoenix pipeline at the end of July, Kinder Morgan had to replace the 8" line currently in place. Instead of a straight replacement, however, Kinder Morgan will install 12" pipe, substantially increasing capacity.

The first phase of the pipeline replacement will take place in the area where the rupture hit, requiring 4,800 feet of new pipe to fully repair the line. This phase of the project was expected to be completed by the end of September.

Other work on the pipeline will be phased in, including four miles of 12" pipe south of the rupture area. Kinder Morgan expects that portion of the project to be completed by Dec. 15 with a third segment of upgrades — including over six miles of new pipe — to be completed by Feb. 1, 2004.

Kinder Morgan officials say the wider pipe will increase capacity on the line into Phoenix by 73% to approximately 105,000 barrels per day.

The cost of the pipeline expansion is estimated at over $12 million.

GUBERNATORIAL CANDIDATE SAYS OIL COMPANIES ARE GOUGING

SACRAMENTO, CA. — As California's race for the Governor heats up, Democratic Candidate Cruz Bustamante tried to gain public support by accusing major oil companies of "ripping off" Californians.

Bustamante also pledged that he would ask the Legislature to amend the California Constitution to bring the major oil companies under state regulatory control if he were elected to serve as Governor.

"Californians are being gouged and under current law we are powerless to do anything about it," said Bustamante.

The candidate made the announcement in front of Lali Mini Mart, an independent gasoline station in Sacramento, CA., while slamming the major oil companies.

"Six oil companies control 90% of the California market," said Bustamante. "In the last two weeks, they caused the largest jump in gasoline prices ever recorded." Bustamante made the announcement while the West was reeling from the effects of refinery slowdowns and the rupture of the Kinder Morgan Phoenix pipeline.

Bustamante's staff "picked the wrong venue for the announcement," said Jay McKeeman of the California Independent Oil Marketers Association. "The Lali Mini Mart is an independent, family operated station in Land Park that has been managed by Akem Singh Virk for 1 1/2 years. As an independent station operator, Mr. Virk's wholesale price is dictated by the prices set at the refiner level, which have risen dramatically over the last two weeks."

McKeeman continued, "Due to the same market dynamics that have affected the average consumer's price, Akem has had to increase his street price. In fact, for the last four days he has been selling at a loss because his wholesale cost is higher than his posted, competitive street price. There is no 'price gouging' at this station chosen, in error, by Mr. Bustamante."

A major oil representative noted, "That's classic. The poor service station owner is selling under his cost and the government is making 50 cents a gallon on tax. But Bustamante wants more."

Bustamante is currently serving as Lieutenant Governor in the state of California.

COLORADO ALLOWS "OUTSIDE" CALIBRATION

SNOWMASS, CO. — The state of Colorado has begun authorizing independent companies to perform calibrations at retail service stations.

"This idea started several years ago when a major oil company was getting a large number of inconclusives due to meter calibrations," explained Dick Piper, director of Colorado Department of Labor & Employment, division of Oil and Public Safety, Denver, CO. "They kept asking us to come out and recalibrate their dispensers and we just couldn't handle it all."

Piper explained that in an effort to solve the problem, the state "set up a test company with this company. We trained the contractors, calibrated their cans and, most importantly, followed up behind them and we were very pleased with what we found.

"Recently, a large grocery store chain approached us about using their maintenance staff. They wanted the authority to adjust their calibration more closely than the law requires and more frequently than our inspectors are able to get out to the sites."

Based on these two experiences, Colorado has formalized its procedure and developed an authorization process to certify specific companies to perform calibrations at retail service stations. The process involves testing of the inspectors, training, and issuing the authorization.

"We allow them to break our seal and replace it with a new seal," said Piper. "The new seal will have two elements: a number that identifies the company and a second number that identifies the individual that performs the calibration." He added that, "If we find anything out of order we will, of course, terminate the program."

Piper said that although the contractors are allowed to perform calibrations, the state "will continue to do our inspections with our inspectors on the same routine schedule that we do everyone else. What I want to make sure is you understand we have no intention of replacing the service we provide to inspect retail service stations and perform meter calibration."

7-ELEVEN OFFERS NEW SLURPEE OPTIONS

DALLAS, TX. — 7-Eleven is offering two new Slurpee products to appeal to wildly different consumer demands.

The first product, a Diet Pepsi Slurpee, is targeted to appeal primarily to women as well as dieting and diabetic customers. The c-store chain will emphasize its calorie-free and sugar-free nature.

7-Eleven officials said they had hoped to debut the Diet Pepsi Slurpee in mid-summer but the product required a temperature adjustment in the Slurpee machines, delaying the launch. The Diet Pepsi mixture dispenses a few degrees warmer than traditional Slurpees which are dispensed between 26 and 28 degrees.

The second product is a Slurpee candy straw. The straw is similar to a red licorice but comes in two flavors: Sour Strawberry and blue Raspberry.

The candy straw, priced at 49 cents, is already outselling all other non-chocolate candies at the c-store. "It's a fun new item that we think adds an extra dimension to the whole frozen-beverage experience," said Derek Schmitt, candy category manager for 7-Eleven Inc. "We're actually looking at all kinds of variations. Just what can you make a straw out of and still slurp through it and, finally, eat it."

"It's delicious," said 17-year-old Hamilton Wright who prefers the Blue Raspberry flavor. "It's an amazing combination of Slurpee and candy combined. It makes an extravagant drink." Wright says he buys a Slurpee five times a week and indulges in a candy straw approximately once a week.

7-Eleven officials say they hope the products will increase traffic in the stores by 12-14%. That increase that could generate major revenue — not just from Slurpee sales. The company reports that currently 60% of Slurpee buyers make other purchases while in the c-store.

Originally published in the October 2003 issue of O&A Marketing News.
Copyright 2003 by KAL Publications Inc.