Gas delivery start-ups want to fill up cars anywhere; is it allowed?

SAN FRANCISCO (May 3, 2016) — A new crop of start-ups is trying to make gasoline stations obsolete.

Tap an app and they'll bring the fuel to you, filling up your car while you're at work, eating breakfast or watching Netflix.

Filld Inc., WeFuel Inc., Yoshi Inc., Purple Services Inc. and Booster Fuels Inc. have started operating in a few cities including San Francisco, Los Angeles, Palo Alto, Calif., Nashville, Tenn., and Atlanta. But officials in some of those cities say that driving around in a pickup truck with hundreds of gallons of gasoline might not be safe.

“It is not permitted,” said Lt. Jonathan Baxter, a spokesman for the San Francisco fire department. Adding that if San Francisco residents see any companies fueling vehicles in the city, they should call the fire department.

Yoshi, which operates in San Francisco, was surprised to hear Mr. Baxter's concerns.

“We haven't talked to them. I don't know about that. It's news to me,” said co-founder Nick Alexander. The next day, he said he believed Yoshi was following the law and that it had been careful to limit the size of its fuel tanks to stay under limits outlined in the International Fire Code, a guideline followed by many U.S. states.

Filld, an 18-month-old startup with thousands of customers in Silicon Valley, planned to start service in San Francisco May 2, deploying three delivery trucks. “You can never ask for permission because no one will give it,” said Chris Aubuchon, the CEO at Filld.

The Los Angeles Fire Department said it's drafting a policy around gasoline delivery.

“Our current fire code does not allow this process; however, we are exploring a way this could be allowed with some restrictions,” said Capt. Daniel Curry, a spokesman for the city's fire department. “It's just one of these things that nobody has really thought about before — kind of like how Uber popped up out of nowhere.”

But he said it's not a gray area: “All I can tell you at this time is it's not allowed as per our current fire code.”

Bruno Uzzan, the CEO of Los Angeles-based Purple, said his company is in discussions with the fire department. “I don't know that guy,” he said of Mr. Curry. When asked if Purple would stop delivering gasoline, he replied, “No. Why should we?” Later, Mr. Uzzan said: “The way we currently operate is permitted by the code.”

In the San Francisco Bay Area, Booster Fuels told customers in February that it was halting fuel delivery there at the behest of the Santa Clara Fire Department. The company said the city is reviewing its permit application. Filld's Mr. Aubuchon said that fire department also told his company to cease operations in the county. But Filld has continued operating. “We basically said, ‘We strive to be safe in every way to the consumer, and this is exactly what we do, and we welcome dialog,'” he said. “If it was illegal, they would have and should have told us many months ago.”

Jennifer Yamaguma, a spokeswoman for Santa Clara, said the city manager is compiling a report on gasoline-delivery businesses, which the city council will review. Atlanta's fire department referred a request to the Georgia Department of Transportation, which did not respond to a request for comment. The fire department in Nashville declined to comment.

“We have to look at the safety of everyone,” said Mr. Baxter, the San Francisco fire department spokesman. “You could imagine what could happen if a fueling truck went into a parking garage under a commercial or residential building, it would not be a good outcome.”

Making deliveries

On a recent Monday morning, about 40 miles south of San Francisco, Mr. Aubuchon carefully drove a Ford F-250 pickup truck with 324 gallons of gasoline into a hospital parking garage in Palo Alto, Calif. The truck — also loaded with a pump, two fire extinguishers, a bucket of chalk to absorb spills, two orange traffic cones and a receipt printer — nearly grazed the ceiling of the garage as its radio antenna whipped around. Mr. Aubuchon was looking for a silver Mini Cooper.

After a few wrong turns, he found it. The tiny car's gasoline flap was, to his relief, open.

Mr. Aubuchon unrolled the fuel hose from a spindle in the truck bed, clutched the handle of the fuel nozzle, stuck it in the car's tank and began filling the Mini Cooper. After six gallons, the car's tank clicked. A printer in truck's cab spit out a paper receipt, and he transmitted an electronic receipt to the owner of the Mini Cooper. Then he packed up his supplies and drove away.

“The land value in the city is going up, and the gas stations are becoming more and more sparse,” Mr. Aubuchon said. “This is a disruption to a fuel industry.”

Construction companies, farmers and even some isolated homes have been paying fuel delivery companies to deliver large quantities of diesel fuel and sometimes gasoline for years. But lugging hundreds of gallons of fuel through residential neighborhoods to fill up people's cars while they sleep is new.

“Those larger tanks, while they carry that many gallons for efficiency, if there is a turnover or an accident of one of those, it really is like a big bang; you have problems when any one of those has an accident,” Mr. Aubuchon said. “The size of our tanks is much, much smaller, and we have multiple of them. So for us to have a spill of their caliber, we'd have to have a hundred trucks in a row.”

Harvard MBAs

Yoshi, the company that delivers in San Francisco, was founded by two Harvard MBAs, a former Harvard law student and a former Stanford medical researcher. The startup also operates in Nashville and Atlanta. Booster Fuels has $12 million in funding and big purple trucks that can each carry 1,000 gallons of gasoline. It fills up tanks in parts of Northern California and Dallas-Fort Worth.

There's also WeFuel, which put its first two trucks on the road in Califonira's Mountain View, Los Altos, Palo Alto and Menlo Park in January and is developing technology to notify the company when a customer is running low on fuel.

Purple has a fleet of about 80 cars driving around Los Angeles, San Diego, Orange County and Seattle with up to a half-dozen five-gallon gasoline canisters in the trunk. “We wanted to ­give an option to drivers to skip the gas station, as if they were ordering an Uber or a Lyft,” said Mr. Uzzan. Speaking of ride-hailing services, some of Purple's drivers pick up passengers for Uber between refuel gigs, according to Mr. Uzzan. Uber declined to comment.

Selling gasoline in the U.S. is a big business. In 2014, 10,545 stations collectively sold $534.7 billion worth of gasoline, according to the U.S. Census Bureau. Those stations earned a cumulative $66.6 billion after accounting for what it cost them to buy the fuel.

The startups generally share two intuitions about the gasoline business: One, owning a truck is cheaper than owning a fuel station, and two, the more fuel they sell, the less they'll have to pay per gallon. Mr. Aubuchon, a former venture capitalist, said the company can buy and equip a truck for $50,000, compared with $2.25 million for a station. Filld charges a delivery fee of up to $5 and then asks the same price per gallon as the least expensive nearby station.

Business models

The delivery startups are still experimenting with business models. Purple customers can open the company's app and get gasoline within an hour, and their drivers are regular people with no special certification.

Filld operates around the clock but asks customers to schedule a delivery through their app at least a few hours in advance. They employ commercial drivers who receive Hazmat certification. Both Purple and Filld deliver to residential areas, while Yoshi and Booster are focused on filling up gasoline tanks in office parking lots. Yoshi's trucks are similar to Filld's.

They're pickup trucks driven by professional drivers. Booster exclusively cuts deals with businesses to fill up their employees' cars during the workday. Its drivers have commercial licenses.

The regulatory challenges are ongoing. For example, counties must certify whether a gasoline meter is calibrated correctly, so it can ensure that customers aren't getting overcharged for gasoline.

Stan Toy, deputy sealer at the Santa Clara County Department of Weights and Measures, said his group has examined and approved meters from Yoshi, Filld, WeFuel and Booster. The department doesn't inspect a truck's fuel tanks. “We don't know who they fall in, regulation-wise,” Mr. Toy said.

Regulatory meeting

The California government agency that oversees the state's fire marshals office is convening a meeting on May 24 to discuss mobile fueling. It doesn't believe the startups' current operations “meet the requirements to be able to operate safely,” said Lynne Tomachoff , a spokeswoman for the agency. “There are so many tentacles to this whole issue.”

Back in March, before the San Francisco fire department told Bloomberg that fuel delivery was prohibited, Mr. Alexander ticked through the regulators that Yoshi had run into. He said highway patrol inspected the truck but didn't quite understand the industry.

“They don't know what to really make of it,” Mr. Alexander said. One county department of weights and measures initially told Yoshi that it wouldn't be possible to certify a fuel pump bolted to the back of a pickup truck, he said. Then the county changed course and gave the go-ahead. “Once you're approved at one, it carries over” in California, he said.

Then he got to the fire marshals.

“There's nothing specific that you have to get them to cross off, but they have jurisdiction over everything,” Mr. Alexander said. “It's kind of fuzzy.” San Francisco's fire department doesn't agree.

Noah Doyle, an investor in Filld, said that for the nascent fuel delivery space, safety wasn't so much a risk factor as a barrier to entry: “You simply have to jump through the hoops with the local authorities to educate them and get them comfortable.”

This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.