TOWANDA, Pa. -- In the backyard of the Marcellus Shale natural gas formation, another petroleum retailer is entering the natural gas business.
This Friday, Dandy Mini Marts is debuting its first compressed natural gas (CNG) fueling location in a grand opening at its Towanda, Pa., c-store, with local dignitaries and industry representatives in attendance.
The site--said to be the first public CNG fueling site in Northern Pennsylvania--has been open for the past month (see slideshow below), with a second site under construction in Sayre, Pa., due to open around the beginning of March, and third location slated for Elmira, N.Y.
As Randy Williams, owner of Dandy Mini Marts, a chain of 70 stores in New York and Pennsylvania, explained in an exclusive interview with CSP Daily News, the decision to get into CNG was a gut call rooted in the desire to be all things to all customers.
"When you offer different things, whether it is fuel or items in your store, you try to appeal to a broader base of customers," said Williams. "If you don't have it, maybe you're left out."
Dandy Mini Marts was recruited to the CNG business by Oklahoma City-based Chesapeake Energy Corp., the second largest natural gas producer is the United States and the primary leaseholder in the Marcellus Shale.
With natural gas prices at record lows and stagnant growth in home heating, Chesapeake has been eager to develop natural gas into a competitive transportation fuel, and as such, has been targeting large chains to jump start the development of the CNG fueling infrastructure.
Chesapeake's local fleet of bi-fuel vehicles will serve as the anchor tenant for the first location, while a local public transportation authority will draw from the Sayre site. About 30% to 40% of the cost for this second location is being offset by a state grant, but for the other two sites, Dandy Mini Marts is shouldering the investment alone. This is no chump change, Williams acknowledged, noting that a CNG fueling location can cost from $700,000 to $1.25 million for a "Cadillac-style" offer.
And Dandy Mini Marts has gone big, opting for two compressors per location. The retailer chose ANGI Energy Systems of Janesville, Wis., for the CNG fueling equipment at these first two sites. Although two compressors is a more expensive option, it was important to Dandy Mini Marts that the CNG fueling offer had redundancy.
"It's no different than a gas station having redundant pumps," said Williams. "If one fails, you're selling product at a slower rate but you're still in business. With redundant compressors, if you are fueling four vehicles at the same time with one compressor, there's a good chance that the flow rate could drop from our target rate of seven gallons to 3.5 gallons per minute."
Beyond the fueling side of the offer, Williams Oil also has exposure on the side of natural gas vehicles (NGVs), since it has not only its own fleet of 150 trucks--which are being converted to CNG--but also owns several auto dealerships, representing Toyota, Honda, Nissan, Kia, Ford and Lincoln. In 2013, it will begin stocking Honda's CNG-powered Civic in preparation for what it hopes will be a ramping up in demand for NGVs.
One unanswered question for Williams is whether CNG will develop an entirely new customer base or simply poach it from the liquid petroleum fuels business.
"Most of these markets are a zero-sum game," he said. "There are X number of customers, and there's a certain amount of demand that's fairly consistent. So all we're doing is converting customers at an incredibly high cost. We're adding another product, but ultimately that customer has to migrate from another fuel, whether it is gas or diesel. As result, we're trading dollars."
Despite these concerns, he is confident that Dandy Mini Marts is positioning itself well for the future. The efforts of the federal and state governments at pushing the development of natural gas through grants and similar financial incentives are serving as a wind at the back of retailers such as him; he also sees advantages to being ahead of the curve in the development of the CNG infrastructure.
"You have to be able to look at it as patient capital--in that you will wait awhile before you will ever see a return or your investment break even," said Williams, who likens it to paying for an expensive college education now in the hopes that it will result in a prestigious, high-paying job in the future.
"I'm optimistic that it will grow to a viable level for my company and that these sites, bare minimum, will pay for themselves," said Williams. "Whether or not you're going to get a good return on it, no one really knows. We certainly don't. This is a little bit of build it and they will come. It's not the field of dreams--it's the field of gas."
For more on CNG, look for the February issue of CSP magazine.