HomeMy WebLinkAbout2008-12-16 Transportation and Infrastructure Committee Minutes
Transportation & Infrastructure Committee
Tuesday, December 16, 2008
Minutes
Councilors Attending: Geoffrey Gratwick, Peter D’Errico, Patricia Blanchette, Gerry
Palmer, Richard Bronson, David Nealley
Staff Attending: Ed Barrett, Jim Ring, Brad Moore, Rebecca Hupp, Jeff
McClaughlin
Others Attending: Dave Jewett, Greg Bartness
Committee convened at 5:00 p.m.
Consent Agenda
Sewer abatement requests were moved by Councilor D’Errico and seconded
without discussion.
Regular Agenda
Rebecca Hupp said the Airport was considering a request from Exxon Mobile to
assign its contract and leases to its distributor Western Petroleum Company.
Representatives from WPC were here previously, early on in the process to
discuss assignments and how that relationship would operate. The
representatives were re-invited due to two new Councilors and because there
had been discussions with Council and WPC/Exxon Mobile, WPC wanted to
provide an overview/presentation.
Dave Jewett provided a handout while Greg Bartness spoke about the September
16, 2008 presentation previously given. Western Petroleum is Exxon Mobile’s
exclusive General Aviation marketer in the United States since 1969. Founded
and privately owned by an executive management team serving all types of
businesses from Fortune 100, governments, municipalities, to independent
businesses. Their products include gas, diesel, propane, aviation, bio fuels, and
lubes. They do not own their own refineries, pipelines, or assets of any kind.
They are an energy solution logistics company. In 2007 sales were 2.1 billion
with over 80 employees and their headquarters were located in Minnesota. WPC
had been a long time customer of Exxon Mobile and supply via pipeline, railroad,
barge vessels, to and from Canada and Mexico. Specifically to the situation in
Bangor, jet fuel supply delivery would be via water or truck. WPC would
recommend supply come out of New York by barge to a terminal 20 miles away
in Bucksport and trucked to the Airport with arrangements for a back up system
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in Portland. Double hulled barges were planned to be used. They looked over
the agreements and felt very confident they could live up to it and then some.
Exxon had 1.2 million tied up in the fuel farm, improvements, etc. at the Airport,
with 700,000 in fuel trucks. WPC would assume 150,000 in tank farm
maintenance and electrical expenses. He spoke of competitive rates and stated
there were two systems in place. One, they could use a formula basis which
was based on the market or a “post it” price based on inventory movement,
which Exxon currently used. WPC would propose to give the City of Bangor the
formula price to assure it would be competitive. They still needed negotiations
on the final formula between the Airport and WPC, with the need to assess
values of all the component parts. The schedule for price reviews could be
annual/semi-annual or more frequent as the Airport felt. He offered in reference
to a performance guarantee that WPC had and would continue to be reliable as
they supply 800 million gallons per year. They would offer more personal and
better customer service than Exxon because their accounting groups were in the
United States, not in another country. The Airport was provided an option to opt
out every five years; the current agreement was for fifteen years. The assets
such as the fuel farm, trucks, etc. that WPC purchased from Exxon would
become the City of Bangor’s property after fifteen years. If WPC hadn’t
performed to standard after five years the assets would revert to the City.
However, if WPC had performed to standard after years and they wished to opt
out the City would pay for the unadvertised amounts on the assets. Dave Jewett
said they had worked with Rebecca and team and there were concerns regarding
pricing/reliability, and asset pool on how it would be handled. Councilor D’Errico
asked for the public’s clarification on the difference between retail and contract
sales. Dave explained that retail was for FBO’s or Aviatat for General Aviation.
Commercial was for larger aircraft, expanding to government contracts as well.
Ed asked if they could guarantee the air carrier price would be competitive. Greg
said it was a 19 million dollar investment and there would be no way to get a
return if they drove all the business away due to high prices. Councilor D”Errico
stated there was a military fuel contract and the logistics were handled by the
military. To have both businesses would be of great benefit. Councilor Nealley
asked about the potential of volumes going down, what the break even point
was, would there be revised pricing, and what the company track record was.
Dave said they provided the information in previous meetings and the
information wasn’t currently on hand but would provide as requested. Councilor
D’Errico asked for a comparison between Shell and Exxon and the tax effects.
Dave stated that as he understood it, it would affect them the same way. The
difference maybe the state tax not targeting industry but it was a broad based
tax. There was continued discussion of the taxes and affects. Councilor
Gratwick asked about how the conversion to WPC would affect the billing of the
Airport. Rebecca explained that the risk would be in holding of products.
Currently Exxon held fuel and the risk and the airlines would hold a risk with
extra fuel in the tanks. But there would be an affect on procedures if there were
multiple inventories and that there would be continued discussion on inventory
management. She said the Airport had the option to buy the infrastructure
(pipelines) at initial value, not at book value and they would not be obligated,
which Dave concurred. Dave also spoke of the intent to have a smooth
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transition for the Airport’s continued function. They would try to develop a
formula that would be fair to everyone and the five year period seemed
reasonable. Ed Barrett asked at what point would they discuss the benchmark
price? Dave said after this discussion, as soon as was appropriate. He explained
that Platts Oil Gram pricing was the price used, which established fair market
value of the fuel by region across the U.S. And what would be needed now was
a discussion on the costs (differential) and then would be presented back.
Councilor Palmer asked the representatives to defend their statement “Western
will provide much better customer service and attention than Exxon Mobile”.
Greg recalled past conversations and had provided a list of references for her to
contact and verify their credibility either way. Rebecca stated she had checked
the references of WPC and the customers. Dave stated in the past couple of
years they converted approximately 40+ airports. They personalize their
business by being available 24/7 – 356 days a year with real people, no
electronic process or digital recordings. WPC bridges the gap and customer
needs are paramount. Councilor Bronson stated he was looking forward to the
Airport’s recommendation. Councilor Palmer requested a return visit and the
timeline for that. Ed stated they needed to act before the end of January and
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suggested discussion at the meeting on January 12 and do something on the
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26. Councilor Palmer asked about what this conversion would take. Dave said
the first would be looking at supply and logistical relationships, next the physical
conversion process with a study of internal accounting, which the Airport’s
interface was compatible with their system. Next they would get to the nuts and
bolts of the equipment to assure the conversion was seamless. The final step
would be spending time with office personnel. He stated the whole process took
approximately thirty days. Jeff McClaughlin with the Airport said changing
suppliers was a complex process and expressed his concerns about the fuel
market.
Meeting was adjourned at approximately 6:25 p.m.
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