September 2008 – Equipment Procurement
“Embrace the relationship you have with your dealers; they can lower your costs over the lifetime of your machine,” Campbell says. “Look for a dealer that can do more than sell the machine, but also provide the resources you need after the sale. Partner with them in the long run to provide the highest productivity and the lowest operating costs.”
Technology and the regulatory pipeline
A volatile variable in the purchase of heavy equipment is the ever-changing regulatory arena. The attempt to lower exhaust emissions first led to the Environmental Protection Agency (EPA) phasing in Tiers I through IV in regulated exhaust levels. Then the California Air Resources Board (CARB) upped the ante in mid-2007. The answers sought by ultra-low-sulfur diesel have proven to be more difficult to achieve, both financially and through infrastructure requirements, than originally estimated – and now consideration for the selective catalytic reduction (SCR) method is creating infrastructure challenges of its own.
“Gaining insight into current and future emissions requirements has been difficult at best,” Brannigan says. “The entire industry is closely watching the CARB versus EPA debate. Once the different models for fleet emissions compliance gain some clarity, our path to regulatory compliance should be slightly easier. Two different approaches to meeting Tier IV emissions are being considered – EGR (exhaust gas recirculation) and SCR. The SCR method has me greatly concerned. It calls for liquid urea to be introduced into the exhaust stream to lower NOx (nitrogen oxide) to required levels. I question the cost of creating an entire new infrastructure for the manufacture, storage, dispensing, and use of urea.
“I remember clearly the original EPA estimate that ultra-low-sulfur diesel (ULS) was going to cost us an additional three cents over the price of low-sulfur (LS) diesel,” he continues. “Obviously, their estimate did not take into consideration the necessary infrastructure changes and profit considerations of the refiners. It’s still hard to believe that in such a short time, the cost of diesel has risen from 50 cents per gallon cheaper than gasoline to 50 cents more.”
Stolowski emphasizes that going green is a good thing. “The green element in our manufacturing processes and the products we make help us to be a good corporate neighbor, and they help the producer to be a good local neighbor,” he says. “At the same time, the need for Tier III engines in California affects buying decisions – either to replace older equipment or to retrofit. You can call it providing what the market needs. And if you want the business, you’d better be there with the technology.”
“We look west all the time for what might be coming down the pipeline to us in new exhaust legislation,” Druyor says, using the CARB ruling as an example. “That’s why we got into our five-gas analysis. We didn’t want to have a knee-jerk reaction to air quality. We wanted to know where our ‘problem children’ were when it came to exhaust emissions. It will help us stay ahead of the curve.”
Mary Foster is a contributing editor to Aggregates Manager. She specializes in covering the construction materials industry.
Rules of Thumb
Make the rent versus used versus new decision:
- If you use a machine less than 600 hours per year, rental is the best bet;
- If you use a machine between 600 and 1,000 hours, buy used;
- If you use a machine more than 1,000 hours, buy new; and
- If you use a machine more than 1,200 hours, buy new with a service contract or a plan for maintaining the machine.
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