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Propane Outlook Going into 2015

By Keith Reid

As we start the New Year, Fuel Oil News interviewed Propane Gas Association of New England President Joe Rose for a run down on the state of this industry segment, the organization’s ongoing initiatives and some of the issues it will be facing in 2015.

Joe-Rose

Joe Rose

PGANE exists to serve the propane industry in the six New England States by promoting safety, education and public awareness of the uses of propane. Its membership includes the nation’s largest propane companies, and many small companies who are often family owned and operated, in many cases for several generations. PGANE was incorporated in 1950 and roughly 80% of the association’s members are also oil dealers.

FON: What are your feelings about the propane supply situation as we enter into the heating season? Last year was a tough one for a variety of reason, from a damp harvest season (propane is used for crop drying) to a range of supply issues (not limited to propane).

Rose: I feel much more confident this winter than I did last winter. The industry has worked hard to get the storage we have filled. And, in getting our customers tuned in to having their tanks filled. And, nationally inventories are at all-time highs. We feel at this point that most of the crops are out of the field, and we did not get blasted with that huge demand and the big price run-up from that.

In New England, the two import terminals in Providence and Newington, N.H.,  both have supply in them that marketers bought that either came from Northwest Europe or northern Africa. We feel good about that. Those resources did not exist last year. So, I think overall our members are in good shape, and here we are [at the end of November] and were still floating in propane. So supply wise I’m pretty comfortable.

FON: Tell us a little bit about the Finger Lakes development. Houston-based Crestwood Midstream wants to store 88 million gallons of propane and butane in former salt mines along Seneca Lake near Watkins Glen. Environmentalists, local business owners and elected officials oppose the project because they are worried about pollution to the lake.

Rose: Finger Lakes has finally received preliminary approval. We’ll see how fast and how far it moves, but at least it’s moving. We were hoping that would happen once the election was over, and lo and behold that seems to be the case. We are in the process of filing to be a friend of the court to have status, so we can participate in the hearings going forward. We want to make sure that all of the parties concerned really understand how important this is.

FON: What is your perception of the commitment at the state level to move this forward? Is there any enthusiasm, or they just going through the motions?

Rose: I think they owe it to Crestwood to make a decision. That’s really how I’m looking at it. How can five years go by and you don’t make a decision? Let these guys move on, one way or the other. It was a storage facility for 25 years, and no one has ever been able to give me a very good reason why it shouldn’t be a storage facility again. They have done all the environmental work. I understand the concerns of those who have opposed it, but there is another storage facility right across the street that has been operating for 30 or 40 years without an incident. And, there’s no reason to think that this one would be any different. Forget about the fact that I’m in the propane business—to me it’s the biggest no-brainer on Earth.

FON: Do you have an idea of a timeline for how things will proceed from here?

Rose: I would think, this could come online probably a year after its approval. The good news is the filling part can start almost immediately, which can happen over the spring and summer. The other thing that’s kind of neat about this is that it’s connected to the Texas Eastern pipeline. So they might not have the rail or truck loading racks built at the beginning of next winter, say it’s approved at the beginning of February or March, but they will be able to inject the product back into the Texas Eastern Pipeline and take it out at Watkins Glen, Oneonta and Selkirk. Frankly, for the New England group, we want to take it out at Selkirk anyway. We are not interested in sending trucks to Watkins Glen, and I don’t know how interested we are in railcars. So, from that perspective, it would be available to us almost immediately.

FON: As we start the New Year, what are some of the Association priorities?

Rose: We really have two big priorities: getting these two big storage facilities online, both Finger Lakes and Sea-3, and secondly we are working on a big project to recruit new technicians and drivers into our industry. [Another terminal roadblock in the Northeast involves Sea-3, a division of Trammo, in Newington, N.H. Sea-3 annually moves some 200 million gallons of liquefied propane, and is working expand the rail yard to handle more propane capacity.]

We know that as our industry continues to age, this is going to present some real problems. Quite frankly, it’s getting tougher and tougher to recruit new people. We’re not in an emergency situation yet, but now is the time to get out there and be talking to young people about what the industry has to offer.

The reality is that not every young person is going to go to college, so it’s really important that they know that there is an alternative. They don’t have to necessarily go to college to earn a good living. And if they don’t want to be a service technician, there’s a group of people that can take a stack of tickets and deliver fuel, and earn a good living and be home at night. It’s steady, year-round work, so I think it’s all good. But getting the word out requires advertising and promotion.

FON: Are there any state-level regulatory issues you have an eye on?

Rose: We have had the Fred Fuller sale to Rymes Propane & Oil. [Cash flow issues last year led to a lack of service for pre-buy customers, and sparked significant regulatory push back in New Hampshire.] And, I mention it in this context. The state of New Hampshire moved pre-buy customers ahead of all the creditors. And, nobody else is getting paid except for the customers, and that’s scary to me. As a state association executive I’m not saying it’s bad that the customers got paid, I want them to get paid, but it’s just a bit scary that the state swooped in and did this, and a lot of my members did not get paid and are not going to get paid.

So what I’m worried about now is two fronts: Did we change the laws of bankruptcy without changing the law? And, if we didn’t, are they going to go back now and try to change the laws and what impact is that going to have? Quite frankly, the propane industry’s position in New England’s is going to be ban pre-buy. Because, the state already told us in New Hampshire last year, that they do not have the ability to manage an escrow account. The cost of processing a bond, if a small company can even get a bond, is prohibitive. And quite frankly, who is going to enforce that? It all comes down to the states do not have the people in order to enforce these things. So the only thing the states can do without spending a lot of money, quite frankly, is to ban pre-buy. But the state legislatures hate to take away choices from customers.

Also, In the state of Vermont somebody is proposing a $0.45 per gallon carbon tax. No bills have been submitted yet, but there’s talk of that on all carbon-based fuels. That’s kind of a crazy idea. We conceptually support energy efficiency, but Vermont is a small state and there are a lot of borders. To think anybody is going to buy gasoline, diesel fuel or heating fuel inside the borders of Vermont, and not cross the borders to get it that much cheaper, is kind of a nutty concept. So, we’re keeping an eye on that.

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