Natural Gas Expansion: One Hot Topic at State and Local Level

As hundreds of members of the propane industry were preparing to travel to Washington, D.C. for Propane Days, the annual advocacy event held in the nation’s capital, there was plenty of legislative and regulatory activity happening on the state and local levels too.

BPN surveyed seven leaders of state associations and found they have been working on a wide variety of issues that affect propane marketers. When asked about the issues that are hot in their states right now, these industry advocates highlighted ratepayer subsidies for natural gas expansion, promotion of the benefits of propane, spring road weight restrictions, advocacy of a state assessment program, propane emergency bills, and even a constitutional convention to rewrite a state’s constitution.

The state associations in both Colorado and New Mexico are keeping an eye on ratepayer subsidies for natural gas expansion. In the last session of the Colorado Legislature, lawmakers considered a bill that would have required ratepayers to subsidize utilities’ construction of recharging stations for electric vehicles and fueling stations for natural gas vehicles.

“We felt that would have set a bad precedent,” says Dan Binning, executive director of the Colorado Propane Gas Association and the New Mexico Propane Gas Association.

“Subsidized expansion has been an issue across the country,” he adds. “We don’t have a problem with expansion unless they have the ratepayers subsidize it. We believe you should let the market decide which fuels are going to be used, not the utilities. If the ratepayers have to pay, there is no guarantee it is a viable program. In most cases, it’s not; that’s why it’s being subsidized.”

With the help of a lobbyist in each state and the National Propane Gas Association (NPGA), Binning and the Colorado and New Mexico associations monitor legislation as it is introduced. They work to support bills that the industry favors and stop in committee those that it opposes.

“We have a few legislators in Colorado who understand the propane business, so we have been successful more often than not,” Binning says. “It is best to get to know your state legislators and explain the issues to them. Usually they want to do what is best for the economy. What is good for the economy is most times what is best for the propane industry.

“In New Mexico, it is very liberal in the legislature. They have tried in the past to regulate the propane industry as a utility, but we stopped that.”

In Missouri, the state association is keeping an eye on anticompetitive legislation that would benefit utilities at the expense of propane providers.

“There isn’t a bill right now that does this, but in the past, there have been efforts to allow new infrastructure to replace old lines with the potential outcome supporting expansion, rather than maintenance, such as replacing an older gas line with a higher-capacity line,” says Steve Ahrens, executive director of the Missouri Propane Gas Association (MPGA).

“Our argument against this is that current Missouri Public Service Commission [PSC] regulations protect ratepayers from paying for utility expansions — that kind of speculative investment should be financed by shareholders, not customers,” he explains. “This is a basic consumer protection function of the PSC. Since these investor-owned corporations have a monopoly in designated trade areas, and because the rates the PSC approves include a guaranteed return on investment of 8% to 12%, those utilities must finance any expansions — or projects like EV charging stations that do not benefit non-users — with other monies.”

Another legislative and two regulatory issues have also been on MPGA’s agenda lately, Ahrens says. The legislation, a proposed tax overhaul that would have complicated collections for marketers, has been defeated, he reports.

“On the regulatory side, we’re marking another year in our action against a utility that modifies propane appliances against the manufacturer recommendations to run on natural gas,” Ahrens says. “Our hope is to get this matter resolved in 2018.”

“Also,” he adds, “we are concerned that the existing consumer protections that prohibit utilities from using ratepayer money to fund other projects, such as electric vehicle charging stations, are being eroded. EV advocates are openly trying to leverage proceeds from the Volkswagen settlement in what appears to me to be a violation of those consumer protections.”

Natural gas expansion is a top challenge facing the propane industry in West Virginia, says Tom Osina, executive director of the West Virginia Propane Gas Association (WVPGA). In 2015, he explains, the state legislature gave the natural gas industry an unfair economic advantage by passing a law authorizing the Public Service Commission (PSC) to approve expedited cost recovery of natural gas utility infrastructure projects deemed “just and reasonable and in the public interest,” and establishing a fast-track application and hearing process.

“The enactment of this legislation has quickly led to unforeseen outcomes for West Virginia stakeholders,” Osina explains. “In 2016, Mountaineer Gas used the new fast-track process to amend an existing petition with a much more costly project and thus bypass appropriate procedural protections for ratepayers and other interested parties. With financial assistance from various WVPGA members and NPGA, we intervened before the West Virginia Public Service Commission and slowed down the application.”

WVPGA has been meeting the challenge of natural gas expansion in a number of ways.

“We have heightened our legislative monitoring in Charleston and made marketers aware of the arguments and services available to them,” Osina says.

“The vast majority of propane outlets in the state are owned by multi-state propane companies,” he adds. “The association encourages their active involvement in state meetings and on the Legislative Committee.

“Legislative issues are always discussed at our three membership meetings held throughout the year around the state. Propane marketers, regardless of size, are always invited to participate.”

In California, the Western Propane Gas Association (WPGA) is promoting the benefits of propane at a time when there is a trend to “electrify everything,” including building energy, agriculture, and transportation infrastructure.

“In the legislature, some bills directly target propane,” says Joy Alafia, president and CEO of WPGA. “For example, one assembly bill seeks to ‘decarbonize gas’ from building use. This would not only devastate our industry, but have widespread consequences for Californians who already pay the highest electricity rates in the nation. The electrification trend is evident on the agency level, too, where the California Air Resources Board [CARB] has assigned almost all of the VW mitigation funds to electric.

“These measures fail to take in to account the versatility of propane, the low GHG and NOx benefits, as well as the future trend toward renewable propane, which boasts a lower carbon intensity value than electric,” she adds. “In a state like California, with some of the worst air pollution in the nation, we are working hard to educate legislators that there is no silver bullet in electric to resolve all of our air-quality issues. Biofuels, for example, represent over 94% of the volume for California’s Low Carbon Fuel Standard (LCFS) program. Electric cannot achieve California’s aggressive clean-air targets alone.

“Speaking of the LCFS program, that is WPGA’s other major focus,” Alafia says. “We are working with CARB to include propane and renewable propane in the LCFS program. We are anticipating renewable propane will be commercially available in our state in the coming years and able to generate credits via the program for transportation and forklift use.”

WPGA has been working toward these goals in a number of ways. It has provided oral and written testimony and met with legislators and agency officials to get the propane industry’s message across. It has enlisted the service of those in the scientific community to provide papers on the benefits of propane and renewable propane, and has encouraged propane marketers to stay engaged by reading the association’s newsletter and other publications for the latest news. It has also reached out to propane marketers to send WPGA their customers’ contact information so it can connect propane consumers with lawmakers and regulators.

“We also need consumers to tell the propane story,” Alafia says. “It’s one thing for the industry to tout our benefits, but quite another when consumers share how propane is an integral part of their energy needs. Lawmakers and regulators should also hear from fleet owners, construction professionals, farmers, and others who can share why propane is such a great fuel.”

Propane marketers in Wisconsin scored two victories in the state legislative session that ended in February, says Emma Corning, executive director of the Wisconsin Propane Gas Association (WPGA).

With one, they gained relief from spring road weight restrictions. During the spring thaw, certain townships in Wisconsin restrict vehicles exceeding a certain weight from driving on some roads. A law passed during the most recent session exempts certain vehicles delivering propane from these restrictions.

“This was a safety issue,” Corning explains. “Some areas required that deliveries be made between midnight and 6 a.m. At that time, there is ice on the road, and customers don’t want to have a truck backing up near their home at midnight. It was also expensive and cumbersome to comply with these restrictions.”

With the second legislative victory, businesses in Wisconsin gained some relief from the state’s personal property tax. This is a tax that businesses have to pay each year on the value of their tangible personal property. With the passage of the current state budget, non-manufacturing machinery is now exempt from this tax. For propane marketers, this means propane tanks, trucks, and some office equipment may be exempted.

“The personal property tax is antiquated, unequal, and it is something many states either don’t have or have phased out,” Corning says. “It taxes businesses twice; they pay sales tax when they purchase the item and then they pay personal property tax on the value of that item every year.

“We have been working with members to help them through this first year of the exemption, because there is a learning curve as far as determining which equipment goes in which category,” she adds. “We have been holding webinars and we have been working with an attorney to put out guidance statements.”

WPGA and a coalition of more than 30 other organizations will now work to exempt other categories that are still subject to the personal property tax.

Both victories were achieved with the help of propane marketers who are members of the state association.

“This was one of our most successful years for member engagement,” Corning says. “When we held a state legislative day, 40 members came down to the capitol to meet with legislators. When we sent out email alerts asking members to make phone calls to legislators, 1400 outreach efforts were completed by members.”

One legislative effort that did not succeed in Wisconsin in the most recent session was a bill that would authorize the Wisconsin Propane Education and Research Council (WPERC) to levy an assessment on odorized propane. This passed one house of the legislature, but not the other. WPGA hopes to introduce this bill again when the next session begins in January.

“Safety and consumer education are two of the things we can do with the funds,” Corning says. “We do a lot of fire training, but with the limited budget we have, it would take 10 years to go through all the fire departments.

“Many legislators don’t understand what a state assessment program can do,” she adds. “Once they understand it is an industry-funded program, and it is for safety training, they do support it.”

Also on the agenda in Wisconsin are monitoring natural gas expansion and working with regulators to repeal or review restraints on public refueling for autogas.

Since the beginning of the year, the New York Propane Gas Association (NYPGA) has been dealing with the aftermath of a will-call customer’s calling local news media to complain it was taking too long to get a delivery of propane. That call resulted in extensive news coverage, an investigation by the state attorney general, and two so-called propane emergency bills.

A propane emergency bill in the State Assembly, introduced by Assemblyman Angelo Santabarbara, specifies that if a state of emergency has been declared, or if individuals are in imminent danger, any licensed LPG supplier may refill a tank the consumer is leasing. This bill has passed in the Assembly.

“The entire bill tries to fix an issue with a law that does not exist in New York — specifically, a container law,” says NYPGA executive/technical director Shane Sweet.

When that bill was introduced, Sweet, members of the NYPGA executive committee, and propane marketers reached out to state representatives of both parties. They also worked with a state senator who introduced a bill that was similar, but better, and addressed concerns propane marketers had about the Assembly bill.

The bill in the State Senate, introduced by Sen. James Tedisco, requires that the company making the delivery to a tank it does not own has liability insurance and assumes liability, requires that company to notify the owner of the tank of any changes that have been made to it, and says the company that owns the tank is not liable for the actions of a company it authorizes to make a delivery to the tank. It also states that, outside of a state of emergency, no one else may fill a tank without the permission of the tank’s owner. As of early May, this bill is in a Senate committee.

“The crux of this was whether a company could fill another company’s tank,” Sweet says. “The Santabarbara bill acted as if there was a container law in New York, but there isn’t. Companies don’t do it, though, for safety reasons. Right now in New York state, maybe 2% of companies will put propane in someone else’s tank without permission.”

“The bill could die as the weather warms up, or it could pass,” Sweet says. “Whatever happens, we will deal with it.”

In Louisiana, the Louisiana Propane Gas Association (LPGA) is among many in the business community advocating for a constitutional convention to rewrite the state’s constitution. The state has been struggling to balance the budget, in part because dedicated funds have limited legislators’ ability to make changes, says Randy Hayden, executive director of LPGA.

“Louisiana had a constitutional convention in 1973 and made major revisions,” he says. “Since then, hundreds of revisions have been made which dedicate funds and tie the hands of legislators when it comes to moving funds around to balance the budget. Now we are talking of another constitutional convention with everything on the table. We expect to have one by 2020.

“One way or another, the business community will be involved,” Hayden adds. “That could be good, or you could get your ox gored if you are not prepared. Other energy sources may be able to position themselves where they can better compete, so we have to promote our value. We need to make people understand that the propane industry is a group running lean and mean and providing tremendous value.

“Homeowners love the products and services we provide. Ultimately, legislators will see us as an industry that needs to be either propped up and supported or chopped down. We have done very well politically over the years, and I believe we will do very well in a constitutional convention.”

Other issues on LPGA’s agenda include attracting Volkswagen settlement money and supporting the energy industry when it comes under fire from protestors.

“We have been very pleased with the support of our legislature and our governor,” Hayden says. “I think if we can get the state’s issues settled through a constitutional convention, Louisiana will remain a leader in the energy industry.”

—Steve Relyea