New NORA Chairman Wants Sunset Provision Gone

Oilheat marketers are struggling through a tough heating season marked by high energy prices and slow receivables, and the challenges will continue in the months and years ahead. The National Oilheat Research Alliance (NORA) is up for reauthorization in 2009, and NORA leaders face a fight trying to eliminate the "sunset provision" which requires the Alliance to win reauthorization every four years. Marketers will also continue to grapple with fallout from the U. S. Environmental Protection Agency's (EPA) sulfur reduction program for on-road and off-road diesel, and regulators are expected to begin enacting new sulfur-reduction mandates soon that will target heating oil. Amid all these challenges, NORA is coming under new leadership, with James Townsend ending his two-year tenure as chairman and Bob Boltz stepping into the position. Boltz is president of Vincent R. Boltz Inc., of Lebanon, Pa., and has held leadership positions in numerous industry associations, including the National Association of Oil Heating Service Managers (NAOHSM) and the Petroleum Marketers Association of America (PMAA). From 2001 to 2007, he chaired NORA's Education and Training Committee. He recently fielded questions from Oil & Energy.

What are some of the challenges that NORA faces in getting the right training to the right people?
I think that location and time are the challenges. We're talking a lot now about online courses because of all the people in the hinterlands. How do you train people in Washington State when all the training is in the East? And the training season is only about six months, so it's training at the right time of year with the right programs. The second problem is that it's hard to have full–time trainers because of that short schedule.

Outside of nuts-and-bolts burner training, are there other topics that should be taught more?
With pricing as it is, the business management courses are going to have to be looked at a lot more this year. Smaller dealers have to look at this much more in terms of business management, such as cash flow and dealing with bankers. We're working with [the Massachusetts Institute of Technology] to start a management course. In the 1970s and 1980s we went from delivering 1,200 gallons to 800 gallons [per customer] and started getting more into lawn care and HVAC. As we see more conservation and better insulation, how does the dealer evolve? That will be the thrust of this training: where do we go from here, what is our future and how do we have to prepare for it?

What else can NORA do to ensure that technicians and installers have access to all the information they need?
We have to get more information out on what the different Web sites carry for manuals, installations and troubleshooting. When I started in the business, the supply houses were where the training was done, and they don't have that any more, and they don't have quite the knowledgeable staffs that they once had. I think we'll be seeing more and more of the manuals online, and we have to look at some ways to get more comfortable accessing the information.

You are stepping up to be chairman of NORA. What do you want the Alliance to achieve in the next two years?
I think the highest priority is getting reauthorized without the sunset provision. It's really hard to invest in the R&D without assurance of a revenue stream. After that, the priority is getting more into the R&D for better equipment and to improve the training. Our assets are our equipment and our people, and they're good. It's reinvesting back into that.

Sales of heating oil decline almost every year and we are steadily losing market share. What sort of future do you foresee for the Oilheat industry?
Are we really losing market share? I'm not sure of that. Where we're really losing is the new construction market share, and that is why the new equipment has to be developed. If you look at the existing housing stock, we're losing the same as gas through conservation, insulation and new equipment. The cost differences [between oil and gas] have to level out over time, and we have something the gas industry doesn't have. We have better trained techs, we have a level of service unheard of in gas industry, and we know these people. We're not just some corporate entity sending our bills to some large city in the Midwest. We're closer to our customers, and they believe in us more.

What do you see as the best selling points for heating oil vs. natural gas?
It's us, the people in the industry. It really is. Talk to someone that heats by gas and had to call the gas company for service. I think that says more than anything.

Vincent R. Boltz has diversified considerably. What services do you offer today, and how did you go about diversifying the company?
About 15 years ago I had a friend in a plumbing business who was getting out, and his son didn't want to take over, so we joined up and we started with plumbing and with heating and cooling. We really started pushing that, and then we got into air conditioning, heat pumps, natural gas work and installations in light commercial. Now we're getting more into solar, which has a lot better equipment now than in the '70s and '80s.

How essential is diversification to the typical Oilheat dealer?
For what it takes to get an oil driver on the road these days, you can't afford to lay them off and not get them back, so the idea is to have full employment all the time for all your people, and diversification is how you do it. We're evolving more into mechanical contractors, and the other thing is we realized we have to make a profit in service. For years they used to give that away.

Vincent R. Boltz does not offer fixed-price or capped price programs? Why not?
I'm not smart enough. There are winners and there are losers in everything. Riding the market causes pain in years like this when the prices go up, but [price programs] are so hard to manage that only large companies with a dedicated group of people can manage it well. Being a small dealer, I don't have the time or expertise to do it.

We've already seen a number of oil companies renege on pre-buy agreements this winter. How bad is that for the industry?
It's a huge black eye. However, since many customers have been with their dealers for years, it may help customers understand the need to find a company that is dependable and trustworthy. Trust is always going to be our main thing. Most of these companies made a strategic error in a very tough time, and that is unfortunate. However, if there is fraud, then prosecution is appropriate. The problem is that sometimes the people that go to a lot of training aren't the ones who really need it. People should be talking to their accountants more before doing pre-buy. I think this whole pre-buy and caps thing has taken over the industry and caused a lot of problems for everybody. It's a very sophisticated market. I'm not sophisticated enough to do it, and I don't know how many are.

Is there anything NORA or any industry group can do to head off future company failures?
We can get the training out for management, but how do you get it down to the people who really need it? Our biggest advantage is that we're independent businessmen, and our biggest disadvantage is that we're independent businessmen. We try to get the word out on sound business practices through the conferences and the state associations, but in NORA we can't even lead a horse to water, let alone make him drink.

Some states are requiring contracts and evidence of solvency for pre-buy contracts. Should the industry support those initiatives?
We're in the midst of this in Pennsylvania now, with some legislators looking at a law similar to Connecticut and Vermont. I guess it really comes down to what's in the law and how it pertains to us. If you dedicate a line of credit to covering a pre-buy program, that leaves no line of credit for oil, and most companies can't afford the bonding. If there was a way to help the customer and not put the dealer out of business, I think I'd be for it.

Anybody can buy a truck and become an oil dealer. Should there be a higher barrier of entry to the business?
I guess I'm a free market person. I believe there are enough laws. I can see why people suggest that, but it always worries me when the barriers get higher. If it applies to the guy coming it, it applies to me. My grandfather started in 1925. Why should I have an advantage over someone just starting out in 2008? The best barrier to entry is doing the job better than anybody else, and not providing an opening for a new competitor.

Some people say we can't transition to reduced sulfur heating oil fast enough, and others say it's better to delay the switch for as long as possible. What is your take?
I'd like to see one low-sulfur fuel, but when should it happen is the next question. In NORA we are undertaking a study about that exact question. I've handled low-sulfur fuels, and I know the advantages on the equipment side. I think there's a tremendous advantage, but the supply has to be there at a price point where everyone can afford it, and there can't be price blowouts. The whole world is going low-sulfur, and when there is enough to supply everyone, then we should go.

What are the major advantages of low-sulfur fuel for the heating oil industry?
The advantages I see is one storage unit instead of three for heating oil, on-road and off-road. We have a lot of dealers now running three trucks for three products, when we could go to one truck. The fuel could be more expensive, but it could also be cheaper to deliver. We have to look at how many trucks are duplicating the same route with different fuels. The advantages of having one fuel and not worrying about cross-contamination would be huge, and I think it would help everyone. I also believe that taking the sulfur out helps with emissions, which is someplace we have to go. It would also put us into a different product pool and help us solidify supply. As heating oil becomes less of a factor in the big picture, there will be dislocation of product. As we speak today, it's only three cents' difference between ULSD and heating oil. That could change, but that's what it is today.

Sulfur reduction would open the door for widespread use of high-efficiency condensing technology. How important is that consideration?
It would help some, but we do have some condensing equipment that uses existing fuel, and there is R&D on more systems, but that would open the door a little more. I think the huge part of going to low-sulfur is the cleaning of equipment and reducing the NOx and SOx emissions. From an air pollution standpoint that only makes sense and makes it a more valuable fuel for us. I'm from the 1960s, and if we can do something for the environment and it really doesn't cost us to reduce the sulfur, we should be doing it, from a common sense point of view. We're either behind the curve or ahead, and I think we should be looking ahead of the curve. If we have a low-sulfur, low-polluting fuel, that's an advantage. And if we're at 15ppm we're cleaner than natural gas. They always say how clean they are, and we're going to be even cleaner. There is no downside to that.

On the other hand, sulfur reduction could drive up prices. How serious a threat is that to the industry?
NORA is working on a study now to check that because that is a threat. I was selling low-sulfur and I switched to biodiesel two years ago because the difference [between low-sulfur and heating oil] went to 42 cents, and I just couldn't compete any more. So price is a consideration, for us and for our customers, but as long as the price discrepancy is not too great, we're better off using low-sulfur.

What is your take on Bioheat as a marketing tool?
I think Bioheat is an environmentally friendly thing, and if we can do it, why not? As long as we do what the industry recommends on equipment and stay at B5 or below, I believe we should be stepping in that direction. It would help if the whole heating oil pool was partially bio.

Are you selling it?
Right now, we're selling B2. I do not handle anything without B2. When the price breakout occurred between low-sulfur and heating oil, I still felt I needed something for a marketing tool, and I do believe it's the right thing. It's homegrown. It's another area where we have to start slowly, but we really should be using it in the U. S. instead of giving producers a tax credit and letting someone else take advantage of it.