Warming economy offers opportunity for Cryogenic Transportation growth

Oct. 1, 2004
A WARMING economy in the United States and Canada bodes well for Cryogenic Transportation Inc of Easton, Pennsylvania. The situation has provided incentive

A WARMING economy in the United States and Canada bodes well for Cryogenic Transportation Inc of Easton, Pennsylvania. The situation has provided incentive for growth, and this year enabled the industrial gases carrier to open a new terminal in Salt Lake City, Utah, bringing the total to 11 companywide.

“In a down economy, because we are an outsourced carrier, we are the last to get hired on and the first to be laid off,” says David Boucher, chairman and chief executive officer. “And, the gas sector may lag the economy, but when market demand does increase, and suppliers with their own fleets can't meet the demand, then it really heats up for us.”

Boucher, George McFadden, and David Hamilton, who were the former owners of Chemical Leaman Tank Lines, are the owners of Cryogenic Transportation. Boucher and McFadden also own Easton Coach Company that provides municipal passenger transportation, as well as charter and tour buses, and Smith System Driver Improvement Institute Inc.

Like many managers in the tank truck industry, those at Cryogenic welcome what appears to be a good economy, but continue to validate that the trend is going to continue and that shippers will respond accordingly.

For now, nitrogen appears to be in demand, Boucher says. For example, the gas is replacing carbon dioxide as part of production processes in the oil patch and as a medium to flash-freeze food.

“One gas that is big for us is argon,” he adds. “We put a lot of money into argon trailers that carry extra payloads, and although it has declined somewhat, we see it coming back.”

Despite the economy generating business, there remains concern about expenses that significantly impact the bottom line, such as insurance rates and driver recruitment and retention, says Boucher.

“Our insurance rates have increased three to four times what they were in the late 1990s,” he says. “We had our first big renewal at the end of 2001. However, the consensus now is that insurance rates may be ready to ease a little.”

Like all carriers, Cryogenic faces the difficulties involved with new hours-of-service (HOS) rules, which are currently in limbo, says Richard Ramach, president and chief operating officer.

Despite a federal court preemption, the company operates under the HOS rules approved this year. As a result, the driver workforce had to be expanded 10% to 12% to remain in compliance and meet shipper schedules.

The company also must comply with new hazardous materials security regulations that have been imposed since the United States was attacked by terrorists in 2001. Particularly difficult are border crossings between the United States and Canada where inspections have been stepped up, causing long waiting lines.

However, the healthy Canadian market makes the inconveniences worthwhile and hasn't discouraged the carrier from soliciting business there. With the Canadian picture appearing bright, Cryogenic is evaluating prospects and tailoring market strategies to tap opportunities north of the US border, says Ramach.

In addition, the carrier also is experiencing an uptrend in demand for product in the Northeast and Southeast sectors of the United States, says Ramach.

Products handled

Cryogenic transports products that include liquefied nitrogen, oxygen, carbon dioxide, carbon monoxide, helium, and argon. The shipments go to hospitals, food-related companies, high-tech facilities, laboratories, and industrial users.

Cryogenic loads product at air separation units owned by gas processors and then delivers to the processors' customers on a regular schedule. A few accounts require on-demand service.

Carbon dioxide and nitrogen are transported to oil fields where they are used in well fracturing, a process that breaks up underground formations to increase production.

Another service takes the carrier to refineries where it performs a purging service in which nitrogen at -300∞F is injected into piping networks in a cleaning process.

In New Mexico, customers that use portable cryogenic tanks for storing product call on Cryogenic to move the tanks from various locations.

Providing all of these services falls to the carrier's drivers. Cryogenic uses 88 contract drivers that lease tractors from the carrier, 10 owner operators, and 42 company-employed drivers.

Driver training

Driver training commands high priority at the company, enhanced by Cryogenic's affiliation with Smith System Driver Improvement Institute Inc in Arlington, Texas. Cryogenic driver trainers receive instruction from Smith System instructors and the school's curriculum is adopted for all driver training.

“We believe in a strong training program and want to create an environment where every driver feels comfortable with the products prior to his/her first delivery,” Ramach says. “We have revamped our training program, standardized the process, and hired driver trainers to support our East and West regional terminals. This ensures the quality and competency of our driver force.”

Although cryogenic liquids are relatively simple to load and unload, the equipment on the trailers is expensive and complicated to repair, another reason for the priority on driver training. A driver mistake can be costly.

A new trailer costs upwards of $200,000. Since 1985, the carrier has invested more than $2 million annually to maintain and expand the fleet, Ramach points out.

Due to the challenges, drivers have to meet company standards that require precise procedures.

All prospective drivers are screened for employment by terminal managers and then sent to Houston for training. Upon arrival in Houston, they receive physicals and drug tests. Although they occasionally fail the tests and are not employed, the company prefers to absorb the expense involved in bringing them to Houston.

“We believe this reduces the risk of hiring a driver who is not qualified,” Ramach says. “We've spent a lot of time developing the driver program and find the centralized training location works best for us.”

He estimates the Sunday-through-Friday sessions completed by drivers cost the company about $4,000 per person.

In addition to typical instruction in company policies, Department of Transportation regulations, defensive driving, and hazardous materials handling, drivers are familiarized with HOS requirements and security regulations.

At the Houston terminal, a 1,500-gallon nitrogen storage tank is used for training in the loading and unloading processes. Most shippers have loading rack pumps and computerized loading equipment that measures by weight. When unloading, capacities may be measured by meters on the trailers, storage tank readings, or weight.

The work appeals to drivers because duties are relatively simple after the procedures have been mastered, he adds. Only one hose is required in the loading/unloading process, no tank cleaning is required, and mixing product is prohibited because threads on hose couplings are specific to certain product loading and unloading equipment.

“We have little downtime, almost no delays,” he says. “It's the nature of the business.”

As an incentive for owner-operators and contract drivers, the carrier provides diesel at a discount at certain of its terminals.

Cryogenic maintains a relatively low driver turnover rate and has hired a full-time driver recruiter.

Applicants must be at least 23 years old and have two years of over-the-road experience. Company drivers receive a bonus for recruiting prospective drivers who are hired, Ramach says.

Coordinating all of this movement are dispatchers at each terminal who manage drivers and services for their areas. To stay in communication with the terminals, drivers use company-provided Nextel radio/cell phones.

In addition to Easton and Salt Lake City, the carrier operates terminals in Irwindale and Woodland, California; Enid, Oklahoma; Baytown, Texas; Birmingham, Alabama; Lakeland, Florida; Madison and Conyers, Georgia; and Toledo, Ohio.

Maintenance skills

Akin to the importance of driver expertise is the expertise required for the maintenance workforce. “They have to be specialists to work on cryogenic equipment,” says Ramach. “We usually hire truck mechanics and then train them ourselves to work on the specialized cryogenic equipment. Sometimes we hire mechanics who have worked for cryogenic gas shippers and are already familiar with the components.”

When mechanics are trained and ready to begin work in the shops scattered throughout the company's terminal locations, they have learned procedures for trailers dedicated to product.

Although cryogenic trailers are relatively low-maintenance vehicles, they and tractors are checked in 30-day intervals. Tractors receive service at 12,000 to 15,000 miles.

To handle the some of the operation growth, Cryogenic has purchased 10 new tractors for its Northeast sector. The carrier also can move tractors from terminal to terminal on an as-needed basis.

The carrier specifies International tractors. Newest power units have Cummins 385-horsepower engines and Eaton Fuller 10-speed manual overdrive transmissions. Specifications also include Dana Spicer steering axle, Meritor drive tandem, International suspensions with 40,000-pound capacity, and Bendix antilock brake system.

Cryogenic specifies equipment to lighten tractors and trailers so that they can handle maximum allowable loads of product. Trailers used for argon and nitrogen have aluminum shells and all tractors are spec'd with aluminum wheels and two 100-gallon fuel tanks. Newest tractors have eliminated a faring and its brackets from the back of the sleeper cab, which has further reduced weight.

There are 154 tank trailers in the fleet. They include those from James Russell Engineering Works Inc and those that were originally assembled by Lox Equipment Company (acquired by Minnesota Valley Engineering, now owned by Chart Industries).

Trailers that haul nitrogen are maximized at 7,000 gallons while oxygen trailers haul 4,200 gallons. Similarly, an argon trailer has a 4,800-gallon capacity and carbon dioxide has 20-ton (40,000-pound) capacity.

Stainless steel tanks are used for oxygen, carbon steel for carbon dioxide, and aluminum for nitrogen and argon.

Equipment includes trailer-mounted ACD-Cosmodyne pumps driven by Kubota diesel engines. Components include Sponsler Inc meters and Goddard and Powell valves.

With a strong fleet on the road and the economy appearing to be sustaining growth, Cryogenic Transportation has an operation in place to respond to the market challenges.