Embracing the New

Manheim, Pa.-based Worley & Obetz has been in the petroleum distribution business for nearly 60 years. Now, as the company expands at an astonishing pace, it's growing with a new product-biodiesel-without letting go of its conservative base.
By Tom Bryan | June 01, 2005
Proactive conservatism.

An oxymoron, maybe, but it's the raw corporate philosophy that has allowed Worley & Obetz Inc., a south-central Pennsylvania petroleum company, to turn an $18 million family-owned business into a $225 million fuel distribution heavyweight in less than five years.

"We've gone through an extremely dramatic growth spurt since Jeff Lyons, our current CEO, took over in 2001," said Brian Gerhart, vice president of wholesale operations. "In those five years, we've gone through a number important transitions, building our wholesale division while successfully making several key acquisitions on the retail side."

In fact, Worley & Obetz, established in 1946, has quickly become one of the largest family-owned energy companies in Pennsylvania. Its home heating oil operation covers nearly the entire south-central part of the state. Its wholesale division, which handles bulk delivery of gasoline, diesel fuel, heating oil and now biodiesel, runs as far north as the New York state line, as far west as Pittsburgh and as far south as Virginia. Gerhart said the company has sustained exponential growth-managing to stay profitable all the while-by executing well-timed acquisitions and landing major distribution partnerships, such as the deal it brokered with Giant Foods that includes supplying fuel to 42 of the grocery chain's Pennsylvania gas stations and handling logistics for another 20 outlets in New York and Ohio.

"We've been aggressive, yes, but we've maintained our conservative base in order to gauge what ventures we want to go full force into," Gerhart said. "We continually ask, 'What can we do that will add more value to our current services without taking away from what we already offer?' That's part of our core philosophy. We built our business on service. Providing exceptional service is what we're all about."

More than just good business people
Whether by coincidence or not, Worley & Obetz ventured into alternative fuels at about the same time its business began to rapidly expand. Gerhart said Lyons was a big believer in alternative fuels from Day One. "He no longer wanted Worley & Obetz to simply be the best at what it did in the petroleum industry he wanted us to keep our sights set on the future and see what else was out there," Gerhart said. "Jeff knew that alternative fuels would allow us to be good citizens-not just good business people."

The company looked into several alternative fuels including ethanol, biodiesel and propane. In fact, Worley & Obetz actually installed Pennsylvania's first propane refueling station. At the end of the day, biodiesel shined. "It was the best niche for us," Gerhart said. "It was a really good fit."

Worley & Obetz didn't jump into biodiesel headfirst, though. Gerhart said the company eased into it carefully. "We started off cautiously because we simply didn't know all that much about the product," he said. "There was a lot of research that we felt we needed to do before offering it to our customers. So we intentionally kept the growth slow and limited in the beginning."

It didn't take long for the biodiesel business to take off. Beginning in 2002, High Steel Structures, the largest steel bridge fabricator in North America, agreed to start using B20 supplied through Worley & Obetz for use in its off-road machinery. Over three years, including three Northeast winters, High Steel has reported success with the fuel and has maintained its commitment to using it.

A short time later, H.M. Stauffer, a lumber fabrication plant in Leola, Pa., began to use bioheat in its oil-fired heating systems-also a blend of B20. "H.M. Stauffer, like Worley & Obetz, is a very progressive company," Gerhart said. "They basically started using B20 under the most challenging of conditions, storing the fuel in a large outdoor tank with exposed lines. And this heating oil tank was used to supply fuel to a very large kiln used to dry lumber. So it was either full blast on or it was off. Seeing their success with B20 under those trying conditions really boosted our confidence-and their confidence-in the product."

Finding success with High Steel Structures and H.M. Stauffer, Worley & Obetz sought a customer to specifically take biodiesel blends to the road. Wenger Feed Mill Inc. one of the largest agricultural feed and service companies on the East Coast, agreed to begin fueling its vehicles with on-road biodiesel in the summer of 2004. Beginning last June, Wenger's Feed started fueling four of its transport vehicles with B10. "Wenger's Feed was looking for advantages in horsepower, advantages in fuel economy, product performance, and because they believe in the advantages for agriculture." Gerhart explained. "They have been flabbergasted with the results."

The need for infrastructure arises
In order to support a growing demand for biodiesel blends, Worley & Obetz needed to build an infrastructure to support it. "Our vision of that infrastructure was opening a retail biodiesel fueling station for our customers," Gerhart said. "We knew, at the very least, we would have one customer (Wenger Feed Mill). We hoped for more than that, but couldn't have predicted what would happen."

June 28, 2004, marked a historical first for Worley & Obetz, and for Pennsylvania, when the company opened a retail B10 refueling (now a B5 refueling site) at one of its card-lock stations in Manheim. Since that sunny summer day, the word about biodiesel-and the demand for it-has spread across Pennsylvania.

"It's of no surprise to me now to see customers from as far as Philadelphia or Altoona driving to our biodiesel station any given Saturday to refuel their diesel Jetta for the week," Gerhart said. "We believed in the product for years but didn't realize how many others shared that vision."

Due to the enormous response and increasing demand for the product, Worley & Obetz has since converted three additional card-lock stations across Lancaster County to supply B5, and the company plans to continue converting their other four locations throughout the county by August. "That [first] station is up to 10,000 gallons a month on blended biodiesel," Gerhart said. "Most of our customers are using biodiesel because they know it is better for the environment, or they are trying to do their part to help the nation reduce its dependency on foreign oil even if it is only a small percentage. People understand what it's all about-and you know what, it's a step in the right direction."

A move to B3 bioheat
Following the positive response to its first biodiesel blend card-lock station in Manheim, Worley & Obetz considered extending its reach with biodiesel by offering it to its residential heating oil customers. When fall hit in 2004, Worley & Obetz made history again, completing the first-known Pennsylvania delivery of B3 bioheat into a customer's home heating system. The ceremonial event included several dignitaries and Pennsylvania Department of Environmental Protection (DEP) Secretary Kathleen McGinty, who helped kick off the event at a Lancaster resident's home.

Following the event, the retail-heating department at Worley & Obetz saw an increase in new customers that overshadowed any of the company's previous marketing efforts. By the end of 2005, Worley & Obetz will serve more than 10,000 customers with B3. "We started offering it as an option," Gerhart said. "Now everyone gets 3 percent biodiesel. If you buy heating oil from Worley & Obetz, you get B3."

Injection terminal marks start of new era
In September, Independence BioFuels Inc., a newly created organization, will open a state-of-the-art injection facility in Highspire, Pa., featuring biodiesel. Fuel distribution companies throughout the East Coast will be able to purchase biodiesel blends at the injection terminal.

To date, in order to keep up with demand, Worley & Obetz has been purchasing biodiesel from as far away as Florida, Kentucky, Iowa and Ohio. Thus, the construction of the injection terminal is a vital component for the continuation of biofuels distribution form Worley & Obetz, Inc. but also for other distributors interested in using the renewable energy. The team evaluated the possibility of having available biodiesel closer to home. In doing so, they hoped to find a terminal specifically designed for the biofuel-not just for Worley & Obetz, but for any company that wanted to distribute biodiesel blends to its own customers.

"At this point, we're not competing with other companies," Lyons said. "It's not about doing things first, but more so doing things right."

The injection terminal will be located at the largest pipeline terminal in the region, Petroleum Products Corp. (PPC). After the terminal is completed, Worley & Obetz Inc. will be the first customer to load from the state-of-the-art facility. "This is going to be really big for our industry because 90 percent of the biodiesel out there is being splash blended right now," Gerhart said. "Right now, if a distributor wants to offer biodiesel blends to its customers, they have to go to where the biodiesel is, load it, then drive to a petroleum terminal and load the petroleum on top of that. That gives you a pretty good blend, but it's a process that is not logistically sound. The other 10 percent right now is being loaded via sequential blending. You're getting both fuels at the same terminal. But it loads the biodiesel and then it loads the petroleum. So you're still splash blending-just a little bit more efficiently."

Gerhart said that with injection blending, a computer measures the percentage of each component of the fuel. The calculations are made on a gallon-by-gallon basis. With B20, for example, every gallon moving through the meter is 20 percent biodiesel and 80 percent petroleum diesel. Before the fuel reaches the customer's truck, it will have been seamlessly blended. For a first-time customer purchasing biofuels, from a convenience standpoint, this process is no different from the current procedure they follow in purchasing diesel or heating oil from a standard petroleum pipeline terminal, Gerhart said.

"Every single tractor trailer operator, on a load-by-load basis, will be able to drive their truck into the loading rack, walk up to a touch screen computer system, enter a driver-specific access code and select the product of their choice-low-sulfur on-road diesel, red-dyed low-sulfur diesel, off-road diesel, heating oil, biodiesel-down to precise percentages," Gerhart explained. "The biodiesel options will be 2 percent, 3 percent, 5 percent, 10 percent and 20 percent. The computer will ask [what company's] diesel fuel you want to use-a key aspect of the whole system-and then you press start and watch it load."

Gerhart said the system gives the customer a superb blend at 800 or 900 gallons per minute. "Drivers are going to be able to load biodiesel blends without seeing any difference [in load time]," Gerhart said. "That's where the effectiveness comes into play. Our industry is built on pennies-and tenths of pennies. Anytime you can save time or be more efficient, it counts.

Last year, Worley & Obetz bought and resold about 250,000 gallons of B100. This year, Gerhart said, the company will purchase approximately 1 million gallons of B100.
With the injection blending facility expected to start up in September, the Worley & Obetz team is eager to see what new expectations biodiesel can exceed. As the company awaits the completion of the facility, it has dedicated itself to educating the public and other companies about the benefits biodiesel offers. "At this point, it's about spreading the word of this remarkable and renewable product," Lyons said.

Tom Bryan is editorial director of Biodiesel Magazine. Reach him by e-mail at [email protected] or by phone at (701) 746-8385.
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