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Gas Stations Running on Fumes

Charlie Thomas is worried that he may be forced to shut down his Satellite Beach, Fla., gas station in part because a state law requires all stations to install tanks to pump gas with at least 10% ethanol by year's end.

A combination of environmental rules, mandatory equipment replacement, the down economy, increased competition from big-box stores and rising credit-card fees is putting the squeeze on independent gas station owners such as Thomas. "I don't know what the future is going to bring me," says Thomas, who has owned and operated his gas station and repair shop for 20 years.

For about a month, Thomas had no gas to sell. His pumps sat idle, draped in yellow "crime scene" tape to keep customers away as he searched for a supplier who could sell him the non-ethanol gas his current tanks hold.

Thomas, 49, says he lost about half his business when his pumps were down, even though customers slowly returned once he could sell gas again.

If he can't come up with $200,000 to replace his 40-year-old storage tanks with double-lined tanks for ethanol-added fuel, he'll be out of the gas business, he says.

"It is a very tough business to be in," says Brandon Wright, spokesman for the 8,000-member Petroleum Marketers Association of America.

Scott Dennis, who runs a lawn care business in Satellite Beach, says it would be a shame to lose a neighborhood fixture such as Thomas' station to environmental regulations and the economy.

"I guess we all have got to conform, make the best of a bad situation," Dennis says.

'Rules never get easier'

James Patneau Jr. owns four independent gas stations in Medina, Ohio. He says he has seen many of his fellow gas station owners file for bankruptcy.

"It is tough dealing with the federal and state government," Patneau says of the regulations.

"The bottom line is there is a progression that the rules never get easier, they only get tougher," he says. "These guys are going to walk away from these locations."

Aside from ethanol requirements, the Environmental Protection Agency requires states receiving federal money to take measures to protect groundwater. To comply, almost 40 states require stations with tanks within 1,000 feet of any source of drinking water to replace tanks or install new ones that add a second wall of protection, EPA spokeswoman Latisha Petteway says.

Several states - including California, Colorado, Idaho, Maine, Michigan, Pennsylvania, Tennessee and Texas - require double-walled tanks regardless of distance to drinking-water sources when station owners replace old tanks or install new ones, Petteway says.

The regulations help preserve valuable resources, says Don Carr, spokesman for the Environmental Working Group, a research and advocacy group in Washington, D.C.

"You can't put a price on the availability of clean, fresh sources of drinking water," he says.

A look back at losses

In 2007 and 2008, about 3,000 independent gas stations closed, leaving about 161,000 stations nationwide, according to Debra Reschke of the National Petroleum News, an industry publication.

That number appears to have leveled off so far this year, says Petroleum News' Keith Reid, but the losses are likely to continue. Along with a decrease in demand for fuel and new equipment requirements, competition from high-volume dealers such as Costco and Sam's Club is also taking a toll.

Among changes for stations in the USA:

California requires its 9,500 gas stations to install vapor-recovery systems where big tankers pump gas into underground storage tanks and at the consumer pumps. Equipment for those upgrades costs $50,000 to $80,000 per station, says Jay McKeeman of the California Independent Oil Marketers Association.

Only 40% of the state's stations met the April 1 deadline, McKeeman says, and are now racking up fines. Despite an $8 million program to help those stations comply, McKeeman estimates 10% of the state's stations will shut down.

Florida requires all 10,000 of its gas stations to have double-lined storage tanks by the end of this year. Marketers had a decade to upgrade their tanks, says David Mica of the Florida Petroleum Council.

About 15% to 20% of the state's gas stations have yet to comply and will probably go out of business if they can't find a contractor to replace or upgrade their tanks, says Pat Moricca, president of the Gasoline Retailers Association of Florida.

The EPA has required 19 Ohio counties to install vapor-recovery systems and is talking about making that mandatory in all 88 counties. Fitting an average station in Ohio can cost a minimum of $5,000, says Mason Brown of ANS Distributing in Twinsburg.

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