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October 2005
Pipeline to an Alternative Future

Headquarters in Shelby are in turmoil; the rate of panicked calls fast and furious. It happens to be the day of Hurricane Katrina’s landfall in the Gulf, and to say that the oil and gas supply chain is disrupted is probably going to go on record as the understatement of the year.

“We are getting slammed,” says Thomas Petroleum President, Ray Thomas. “I literally don’t know what’s happening from one moment to the next. During a hurricane, any pipeline interruption starts panic buying, and boy, do we have pipeline interruption.”

He plops down in his office chair, and says, “Things won’t be normal around here until distribution is restored.” He fields two more calls, gets an urgent fax from the North Carolina Petroleum Marketers Association, and in between, tries to talk about his business during calmer times.

 

From the Ground Up

As the day itself graphically demonstrates, the oil industry can change precipitously. But Thomas is more prepared than most to deal with it. An oil man all of his life, he already had years of experience when he started Thomas Petroleum in 1984. A big company he had been working for in the 1970s, now Petroleum World in Cliffside, N.C., was in the midst of a merger when he decided to go his own way.

At first, that meant working entirely out of his own home where, to his annoyance, his secretary quickly became more of a babysitter to his children. So he had to change plans again, and find offices elsewhere. For a while he was hopeful about a location in Greensboro, but when that fell through, he ended up choosing the location in Shelby where the company is headquartered today.

More than 20 years later, Thomas Petroleum has offices in Shelby and Robbins, and annual sales of over $100 million.

“Our goals have changed over time,” Thomas says. “We used to have just three kinds of gas: regular, premium and unleaded. Now we have more. We used to have pumps at ‘mom and pop’ stores, and now everything is super pumpers. These bigger places have meant we have to be in the real estate business and the convenience food business as well.

“But mainly, we are petroleum marketers. We are the middlemen; they used to call us ‘oil jobbers.’ We buy the refined product and distribute it to the motoring public.” He adds that territories used to be concentrated; now they are spread far and wide. His territory includes North and South Carolina and eastern Tennessee.

Thomas Petroleum operates a number of the area’s Shell, BP Amoco, Chevron Texaco, and Conoco Phillips stations, as well as unbranded ones like Crown and Sunbelt. Thomas seems to shrug this off casually, with the slight impatience people reserve for old news. He’s the kind of man who tends to say very little about his past successes; he would rather be doing it.

These days, he’s face-to-the-wind, focused full speed ahead to the future, and some of that future is spelled a-l-t-e-r-n-a-t-i-v-e. And, as before in his life, it’s a future he didn’t originally envision, or even particularly welcome when he first considered it.

 

Fuel of the Future

“I wasn’t too excited about the whole alternative fuel thing at first. We did gasohol, as it was called, back in the ’70s and early ’80s,” says Thomas. “But about a year ago, I began taking more of an interest after talking with two British chemists who persuaded me of the benefits. We realized we could start something. It’s good for America, and it’s patriotic. We’re not sending our hard earned money over to the Middle East.”

An oilman at heart, Thomas still had not quite ‘taken’ to ethanol as an alternative fuel source when a young man by the name of Chad Ertel, a senior at UNC Charlotte, brought it forcefully front and center.

Ertel had been visiting a friend out in Oregon when he first learned about E85. He wondered why, if all the touted economic and environment benefits were as reported, wasn’t ethanol all over the country? He came back to Charlotte and started extensively researching to learn all he could about alternative fuel. One thing led him to another and eventually learned about Thomas Petroleum in Shelby.

Ertel was persistent about meeting with Ray Thomas. When he finally got Thomas’ attention, Thomas listened as Ertel described what he had learned and why he felt so strongly about putting E85 and other ethanol products into the Southeast. In Thomas’ words, “He hounded me about it for two months,” until Thomas agreed and hired Ertel to help launch the alternative fuel pumps.

In July, Thomas Petroleum became North Carolina’s alternative fuel pioneer with the opening of its first retail location selling ethanol fuels in Shelby. Amidst some fanfare, it began offering E-10, E-85 and B-20 biodiesel fuels. It also has four additional locations in the area under contract to get the fuels.

Thomas has put Ertel in charge of promoting ethanol and Thomas Petroleum by making sales and developing and maintaining customer relationships. Ertel points out, “Ethanol is good for the economy, the environment, and I like the fact that everyone wins,” and says he is intent on promoting and building the new fuel infrastructure throughout North Carolina.

“Chad reminds me of myself when I was his age,” comments Thomas. Athough a full-time student at college, Ertel has been busy with his public relations effort to inform the public and the media and educating them about ethanol. He has been remarkably successful at garnering the press and major television networks to take an interest in the Thomas Petroleum offering.

 

A Grainy Subject

Thomas is betting a portion of his company’s future on this alternative fuel. Ethanol is made from the starch in corn kernels, leaving the protein and vitamins behind for other uses. It is blended with gasoline to make a biodegradable, cleaner-burning, non-toxic fuel. It is rated at 100+ octane, compared to gasoline’s 87+ octane rating, and it can boost engine horsepower. “It’s so clean that you’ll find it actually cleans the corrosion out of your engine,” Thomas smiles.

The three kinds of ethanol fuel Thomas offers are E-10 (10 percent ethanol; similar to the old gasohol); E-85 which is for the newer, modified SUVs and ‘flex’ cars (85 percent ethanol); and B-20 for any vehicle that runs on diesel (20 percent soybean oil).

“You know what would really start something here in the Carolinas is if the farmers started to plant corn and soy for these fuel products,” Thomas observes.

But don’t expect to convert completely to ethanol fuels; Thomas says he believes there will always be a need for traditional gasoline. For one thing, it is used in the mix to make ethanol. He doesn’t think hybrid cars will erase the need for a pumped fuel either, since gas stations already have invested a great deal in their fuel pumping infrastructure.

Even without fuel shortages affecting the average motorist, Thomas Petroleum is guaranteed to have customers pumping its alternative fuels. The federal government requires that municipalities, cities and the U.S. postal service use alternative fuel if it is available. In Shelby, Utilities Director Jay Stowe says the town is looking into it already.

After all, he is close to the source.

 

Pumping It Up

Two major pipelines from the Gulf supply all of Charlotte’s traditional fuel. Both the Colonial and the Plantation pipelines were hit hard by power outages and restoration takes time – thus the panicked calls to Thomas. To illustrate the magnitude, the Plantation Pipeline is 3,000 miles long, supplying much of the southeast with a normal 25.2 million gallons of gas, jet fuel and diesel per day. That’s when it is operating normally. And that’s the smaller of the two pipelines.

Ordinarily, fuel flows from the Colonial and the Plantation to Paw Creek Terminal in Mt. Holly, northwest Charlotte, where an independent middleman like Thomas Petroleum gets it and distributes it. Katrina suddenly shut down more than 80 percent of daily production, causing the kind of ripple effect that will be felt for some time to come.

Ethanol prices ordinarily compare favorably to regular gas prices at the pump, and the recent and predicted hurricane activity may strengthen that even more in favor of the alternative fuel. Gasland USA in Shelby reports that E-10 is closely tracking the fluctuating price of regular gas from day to day. E-10 being only 10 percent ethanol can be used in any gas-powered vehicle. The higher-ethanol content E-85 is for flex-fuel vehicles only, which typically are many of the newer cars, SUVs and trucks. (This flex-fuel capability is listed in the owners’ manual and prominently displayed on a decal inside the vehicle’s door.) E-85 is expected to more closely track premium prices.

Biodiesel was an easier decision to offer at the pumps since it is a little more familiar. The U.S. Department of Energy lists 31 distributors of it in North Carolina. Biodiesel can be used in any diesel vehicle, and costs about the same as regular diesel.

Thomas says he hopes to be able to supply his ethanol fuels to 40 more retail outlets in the next year or so, and the National Ethanol Vehicle Coalition thinks the public is more than ready to buy it. Robert White, the Coalition’s project director, says though ethanol fuels are made with some percentage of gasoline, they use less. “It’s kind of a ‘feel good’ thing for consumers,” White says. Ethanol is cleaner burning, reduces carbon dioxide, and has higher octane than gasoline. Best of all, there could be more direct control over it, particularly if, as Thomas advocates, North Carolina farmers begin planting their fields with the corn and soy needed to manufacture it.

Thomas’ ambitious two-year plan calls for 50 retail units providing his ethanol products to the motoring public here in the Carolinas. ”It can’t come soon enough,” Thomas says with some chagrin, no doubt wishing they were on-line already.

First things first, as he grabs the phone and sinks back into his chair.

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