AGENDA #5b
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Fuel Supply, Cost and Budget Issues for the Town’s General Municipal Fleet and Transit Bus Fleet
DATE: September 26, 2005
This report provides information about fuel supply, cost and budgetary impact for the Town’s fleet.
Recent volatility in fuel markets have caused us to make changes in our purchasing practices for fuel.
DISCUSSION
Supply:
We purchase fuel through state contracts with local suppliers. Recent interruptions in the flow of fuel to the region following Hurricane Katrina caused us concern, but we were able to obtain adequate supplies of fuel to fill our tanks at both the Public Works and Transportation Departments.
Barring future unforeseen events, we believe we should be able to obtain adequate supplies of fuel for the rest of the year.
In the event of a supply interruption or shortage, purchases would, of necessity be based, primarily, on availability and second on cost and other considerations.
Cost:
Current unit cost by fuel type (petroleum/bio based fuels) is as follows in order of cost:
| Fuel Type | Cost/gal. | Budget Cost/gal. |
|---|---|---|
| Kerosene | $2.35 | $2.00 |
| Biokerosene | $2.26 | $2.00 |
| Diesel | $2.21 | $2.00 |
| Biodiesel | $2.15 | $2.00 |
| Gasoline | $2.14 | $1.80 |
As discussed above, it is our general practice to use kerosene in our buses and biodiesel in our municipal trucks and equipment. If however, as in the present circumstance, the cost of either of these fuels exceeds our budget, then we convert to using the least expensive diesel fuel. Biodiesel is currently selling for less than regular diesel which, historically, has run $.15 to $.20 higher.
If biodiesel continues to cost less than low-sulfur diesel when we next purchase fuel, we will buy it for use in the heavy truck and equipment fleet.
We have been reluctant to use biodiesel in the bus fleet. Our principal engine manufacturer, Detroit Engine, has expressed concern about using the fuel in their bus engines. Their written warranty advisory states:
“Failures attributed to the use of biodiesel will not be covered by Detroit Diesel product warranty.”
We have little information about the use of biodiesel in transit bus fleets; therefore, until we have better information about use of B-20 biodiesel in transit buses, we would recommend against its use. Use of biodiesel fuel would require modification of the fuel calibration monitors on our buses to accommodate the use of biodiesel fuel. Switching back to another fuel because of a price change would require another recalibration. Such modifications would cost approximate $100. We are continuing research on use of biodiesel fuels in buses similar to ours.
Budgetary Impact:
The fuel throughput (estimated annual usage) for the general municipal fleet (276 vehicles) is about 217,000 gallons (131,300 gallons of gasoline and 85,800 of diesel/blends). The Police Department is the primary user of gasoline at 67,800 gallons, followed by Public Works at 41,800 gallons. The fuel throughput at the Transportation Department refueling facility is about 632,575 gallons per year (60,700 gallons of gasoline and 571,875 gallons of kerosene/diesel). The Transportation Department operates 86 buses.
The following chart shows the theoretical budget shortfalls (municipal plus transit fleets) based on current fuel costs.
|
Fuel Type |
Projected Use (In Gallons) |
Budgeted Price per Gallon |
Current Price per Gallon |
Current Budget |
Revised Budget (At Current Prices) |
Potential Shortfall |
|
|
|
|
|
|
|
|
|
Gasoline |
191,900 |
$1.80 |
$2.15 |
$345,420 |
$412,600 |
$67,400 |
|
Kerosene |
571,875 |
$2.00 |
$2.35 |
$1,143,750 |
$1,343,900 |
$200,150 |
|
Diesel |
85,800 |
$2.00 |
$2.21 |
$171,600 |
$189,600 |
$18,000 |
These projections assume that prices do not continue to increase. If they do, the shortfall would increase.
All Town departments have been directed to reserve funds in their budgets to accommodate shortfalls in our fuel allocation.
Environmental Considerations
The primary benefit of the use of biodiesel is significantly lower emissions of particulate matter, carbon monoxide, toxic contaminants, sulfur dioxide, hydrocarbons, visible smoke and noxious odors compared to petroleum diesel. Another benefit is the increased lubricity of the fuel, which results in reduced engine wear and longer engine service life. Biodiesel is produced domestically, reducing our dependence on foreign oil and supporting our domestic agricultural businesses. While the use of B-20 biodiesel reduces most harmful emissions, it does increase nitrogen oxide emissions by about 1.2%. Nitrogen oxide is one of the elements necessary for the production of ozone; therefore, the use of biodiesel will contribute to ozone production during the summer months.
Our current practice of using pure kerosene in our buses and a blended biodiesel in our municipal fleet represents, we believe, the optimum balance between cost and environmental considerations based on present conditions.
CONCLUSION
We will continue to carefully monitor unit costs for various types of fuel throughout the remainder of the current fiscal year and adjust our use by fuel type accordingly.
ATTACHMENTS