TEN YEARS after their last visit, the members of National Tank Truck Carriers (NTTC) were back in San Francisco, California, for their annual meeting. Members arrived ready to have a good time, and presentations during the meeting helped keep spirits high.
Greg Hodgen, NTTC's 2011-2012 chairman and president and chief operating officer of Groendyke Transport Inc, said tank fleet executives had plenty of reasons to be in a good mood. “We met at a busy time for our industry,” he said. “Tank truck carriers are experiencing increased business in all sectors, and our suppliers have full order boards.”
During his annual economic report, American Trucking Associations chief economist Bob Costello told attendees that the tank truck sector is still leading the way for the trucking industry. “Tank fleets will grow by about 5% this year and will continue to outpace the rest of the trucking industry,” he said.
Tank truckfleets continue tobenefit from strong activity in the energy and manufacturing sectors. Automobile sales are solid; plastics production should grow by around 2.5% for the next three years; chemical production should increase at about the same rate; construction is rebounding with cement demand up about 6.6% in 2012.
Noel Perry, an economist with Transport Fundamentals Inc, added that the oil and gas shale activity has been particularly beneficial for the tank truck industry. Work in the oil and gas shale regions has created a need for at least 66,000 tank trucks, and demand is growing.
“The big Kahuna is the process water that comes out of the ground once a well is drilled,” he said. “It has to be hauled away for disposal, and the water keeps coming out for many years. The long-term prospect for tank trucks is good.”
Perry said that the drilling market for natural gas peaked months ago, with the number of natural gas wells being much lower than a year ago, leading to a 45% decline in demand for horizontal gas rigs and vertical/directional gas rigs.
“The good news is that fracking is just as effective at getting oil as it is for natural gas,” he said. “
The drop in natural gas has been offset by an expansion in oil. Overall, the rig count is up 6%. So this market actually is quite healthy. If you're in a gas-only area, you're in trouble. If you happen to be in North Dakota (and the Bakken Shale), which is mainly oil, you're in great shape.”
Both economists tempered their optimism with notes of caution. Perry said there is a very high probability of a recession in the next two to four years. “If you're a prudent businessman or woman and making investments in 2012, make sure those investments can survive a recession sometime between 2014 and 2016,” he said. “We will be having the next recession sooner than you think.”
Costello added concerns about trucking companies that generate under $30 million in annual revenue. Many of these fleets are still downsizing. Cash flow issues could push some of the smaller carriers out of the industry. Inflation is rising faster for the trucking industry than it is for the rest of the economy. Fleets were 3.7% smaller in March of this year than they were in March 2011.
Smaller fleets are impacted more by the overall cost of doing business. New trucks cost a lot more, primarily due to the EPA-mandated engines and emission treatment systems. Maintenance costs are rising. Diesel prices have moderated but are still high. The driver shortage is pushing up wages.
Small fleets and large fleets are getting more attention from the Federal Motor Carrier Safety Administration. Jack VanSteenburg, FMCSA Chief Safety Officer, discussed some of the agency's current initiatives, including the new hazmat BASIC (Behavior Analysis and Safety Improvement Category) that is part of the Compliance, Safety, Accountability (CSA) program.
VanSteenburg said the agency is still fine-tuning various aspects of the CSA program. “Right now, we capture all recordable crashes,” he said. “We went out publicly and said we're going to change the crash-accountability system now in place, but as we publicly talked about the plan, people said we have to think this through: ‘You're not a police officer. How do you know you're reviewing the correct police accident report? Who are you going to talk to? The police officer? Truck driver? Passenger vehicle? Insurance company?’ These are things we need to consider.
“What we know now is that those who have a high frequency of crashes are more likely to have future crashes. We know that. If we develop a new crash-weighting program with people that are involved in more crashes, there may be an even higher frequency of crashes. But we are going to do more research. We're going to check some NHTSA (National Highway Traffic Safety Administration) data. Right now, it's raw data in there. We're going to put a disclaimer on that and say that these are recordable crashes only, with no consideration given to accountability.”
Clearly, FMCSA is aware of the increased trucking activity in the oil and gas shale regions. At the time of the NTTC Annual Conference, the agency was working on a guidance document to address certain oilfield transport activities.
(That document was published in the June 5 issue of the Federal Register and is described in detail in the Industry News section of this issue of Bulk Transporter.)
Three speakers addressed the potential of running natural gas fueled trucks in a session entitled “CNG/LNG: Fueling the Future.” There was general agreement among the three panelists that the technology offers significant potential for tank truck fleets, but it is still evolving.
Charles Ker, industry relations manager for Cummins Westport, said he believes the partnership's new 12-liter ISL G engine will be a game-changer when it hits the market in the first quarter of 2013. Target markets for the 12-liter engine are regional haul truck/tractors in vocational applications and refuse collection. The engine has a peak rating of 400 hp and 1,450 ft-lbs, is EPA/CARB-certified at or below EPA10 emission levels, and is a dedicated natural gas engine that will operate on compressed or liquefied natural gas and is capable of using up to 100% biomethane.
More fleets are turning to natural gas-fueled trucks as a way to reduce fuel costs, according to Robert Carrick, sales manager of natural gas for Freightliner Trucks Inc. At the time of Carrick's presentation, the per-gallon prices were: $1.59 for CNG, $2.69 for LNG, and $4.04 for diesel.
“If you have an application that uses natural gas and a fuel station, there is no reason not to buy natural gas,” he said. “Fuel costs are lower, there is less price volatility than diesel fuel, and payback is quicker. Even without federal or state incentives, it's a year and a half to recoup the investment cost. After that, between $15,000 and $30,000 a year goes into your pocket.
“There's dependable spark-ignition engine technology and simple after treatment, with no DPF, no regenerations, and no SCR required. Next year, greenhouse gas emissions become important. There's domestic fuel and energy security with natural gas. And it builds American jobs. Anybody who has been in Pennsylvania at the Marcellus Shale and doesn't see the economic comeback that's being driven by drilling and the manufacturing of all components has to be blind. It's everywhere. If we didn't have this, unemployment would be above 9%.”
Jim Mulvenna, general manager for the dairy and bulk foodgrade division of Ruan Transportation, described his company's experience in managing a customer's natural gas fueled truck fleet. The chosen engine — the 8.9-liter Cummins Westport ISL G — was somewhat undersized for bulk milk hauling. In addition, the compressed natural gas fuel tanks suffered some damage from rocks kicked up on farm roads.
“The bottom line is we had teething pains,” he said. “I'm not going to say these trucks are more than prototypes going down the road, but it is an emerging technology. As far as our application is concerned, there will be options in the future for larger loads and longer-haul fleets. We believe in the technology. We believe it's good for the environment and good from a security standpoint for America, and economically for America.”
In “Considerations in Buying or Selling a Tank Truck Carrier in 2012,” Eric Zalud, head of transportation logistics practice law at Benesch, Friedlander, Coplan & Aronoff LLC said the rules of the game have changed significantly, and some tank fleet executives may need to change their merger and acquisition strategies. Among other things, it's important to understand the sort of contracts a carrier may have with its customers.
Hans Schaupp, president of LCL Bulk Transport Inc, was elected 2012-2013 chairman. Previously, Schaupp was Central Region vice-chairman. He follows in the footsteps of his father, Robert Schaupp, who served as NTTC chairman in 1990-1991.
NTTC's 65th Annual Conference and Tank Truck Equipment Show will be convened in Austin, Texas. The event will be held April 28-30, 2013 at the Hilton Austin. ♦
Find the NTTC Annual Conference Report archive with articles from 2011 to present