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Liability Concern Arises During Palo Alto County Fuel Bidding

By Staff | Jun 24, 2010

With the thermometer reminding the area that summer is truly here, it was hard to grasp the idea of -25 degree temperatures, but the Palo Alto County Board of Supervisors talked about the dead of winter during its weekly meeting on Tuesday, June 22. The subject was the Secondary Road Department’s yearly supply of fuel and a concern over liability by one of the fuel bidders.

Ron Hanson, Manager of Ruthven Coop Oil Company, appeared before the board to air a concern he and his board of directors had over the language of the fuel contract. Palo Alto County Engineer Joel Fantz and the supervisors listened as Hanson laid out his concern with a new bidding requirement for a year’s supply of number two Diesel fuel, with a special anti-gelling additive being mixed with the fuel during the winter, rather than the traditional 50/50 blend of number one and number two diesel.

“The Iowa DOT requires the use of number one Diesel fuel in its equipment that operates north of Highway 20 in extreme cold conditions,” Hanson explained. “I’m not worried about the county plows gelling in the cold weather with the additive in number two, but I don’t want the liability of ambulances and school buses gelling up. Don’t get me wrong, the additive is a good product, but I don’t want to be liable for any problems with ambulances or school buses.”

Hanson’s concern was raised by a provision in the fuel contract that calls for the fuel additive to be introduced to the fuel above a certain temperature to reduce the gelling of the fuel in extremely cold weather. If routine testing found that the fuel was not adequate protected by the additive, then the fuel vendor could be held liable. If found liable, the vendor would be subject to having a bond of $2,500 revoked by the county, having the fuel contract cancelled, and having the county go to a different supplier.

“I said from the start of this that we need to have some number one Diesel in our tanks in the winter,” stated Supervisor Keith Wirtz. “I’ve had to change too many filters in –30 below temperatures because number two with an additive didn’t work right.”

“The additive has to mixed before the fuel reaches its cloud point,” Fantz told the supervisors. “We’re doing this because with the new, low-sulfur blend fuels, the lubricity of the fuel is almost non-existent. It is non-existent in number one fuel, and that needs the additives also. The additive keeps the paraffin molecules from clumping together and gelling up by staying small enough to pass through the fuel filters.”

“There are still some vehicles that will not run on additives,” Hanson pointed out. “I just don’t want that liability. I’m sure the additive will be mixed right, and if the additive is in the fuel, we can’t be liable for it.”

“We will have 10,000 gallons of number one Diesel under contract, if the conditions warrant it,” Fantz pointed out.

 “How much a gallon will we be saving by not mixing number one fuel?” asked Supervisor Ed Noonan.

“There is a difference of 10 cents a gallon, and the additive is five cents a gallon,” Hanson answered.

“Would adding more of the additive help in colder weather?” Board Chair Jerry Hofstad asked, and received a positive answer. “That’s what we could do, then.”

“Well, I’m not worried about the county vehicles,” Hanson said again. “But I don’t want to lie awake nights, worrying about an ambulance jelled up somewhere.”

“Why does the DOT have that recommendation?” Noonan asked.

“Because its 15-20 degrees colder up here than in Des Moines,” Hofstad answered.

“Now, this is the same additive that the DOT uses,” Hanson pointed out.

“Remember, this is a preventative and quality measure, not just a cost-wise move,” Fantz reminded the board. “I understand Ron’s concerns, but he is pretty much relieved of liability if the additive is added to the fuel.”

“Well, it makes me nervous that Ron is nervous,” Noonan said. “He’s pumped fuel all his life, so I respect his views.”

“Well, if you interpret the contract that if the additive is in the fuel then I’m covered, then I’m good with it,” Hanson told the board.

“This is change, and change is scary,” Fantz admitted, “but I wouldn’t recommend it if I didn’t think it would work out. We always have the option to add number one fuel if we feel it’s needed.”

“Don’t worry,” Hanson spoke up. “If I see the 30 day weather outlook calls for -20 below zero temperatures, I’m calling Joel and telling him the number one fuel is on the way.”

“I have no problem with this,” commented Supervisor Ron Graettinger. “I trust Ron and I know he’s a good supplier and will take care of us.”

“I just want to play it safe, that’s all,” Hanson said as the discussion came to a close.

Fantz then recommended to the board that the fuel bid of Ruthven Coop Oil be accepted for all of the county’s maintenance facilities, at a total bid price of $470,402.

Other bids were submitted by MaxYield in the amount of $471,900; Pro Coop in the amount of $473,300 and Star Energy in the amount of $479,000.

After a motion by Graettinger and second from Noonan, the Ruthven Coop Oil bid was approved on a unanimous vote of the board.