Overpeck Gas Sees Large Storage Investment As ‘Peace of Mind’

When Dan Overpeck of Overpeck Gas (Marshall, Ind.) recently heard fellow propane retailers saying wholesale suppliers didn’t take care of them during the past winter, he responded by saying that wholesale suppliers don’t see it as their responsibility in many instances to take care of the retail propane marketer, especially those who take most of their propane deliveries in the winter. “I determined that we as retailers are sadly mistaken if we think we are always the highest priority for the wholesale providers,” he said. “If a cavalry is coming to save us from supply shortages, the cavalry is us!”

These days, Overpeck and his fellow family stockholders are feeling they have “peace of mind” after adding 390,000 gallons of additional storage space to the 300,000 gallons they already had in place. He said the stockholders met in spring 2017 and decided quickly that adding a significant amount of additional propane storage for the 3 million gallon/year retail company was what they must do. “Having lived through the stress of January 2014, we just didn’t want that level of stress again,” Overpeck said. “Once again, in spring 2017, inventories were lower after a winter of strong exports and we felt the winter of 2013-2014 was likely not just a one-time experience but a potential reality each year in the new world we live in.”

On July 9, 2017, Overpeck Gas closed on a new property in the morning and moved in to start work to add storage on it that afternoon. By the end of September 2017, the storage, which included six new 65,000-gal. tanks, was built and filled with propane on summer economics. Summer filling meant allocation was earned on a 2:1 winter-to-summer ratio for the coming winter. “We realize the return on investment will not come quickly,” Overpeck said. “It may be a 10- to 12-year process, but the return on investment and peace of mind will be there, especially when supply gets tight.” He said stockholders felt they would come out ahead investing more in their own company rather than putting investment dollars into other opportunities with companies owned by others. “There is a clear benefit to having peace of mind, and the sight of all of this storage also gives our customers peace of mind that they will have gas during high-demand times. I am pleased with the excitement within our own company.

Allocation Was the Game Changer

Overpeck noted some additional immediate advantages. “With more and more suppliers establishing allocation on a 2:1 winter-to-summer ratio rather than 3:1, that was a game changer that led to adding the storage,” he said. “This most recent winter had its tight moments and there were many times the advantages of the additional storage worked well in our favor for supply security.” He observed that the switch to 2:1 winter-to-summer ratios being the rule of thumb was a big factor in wanting storage that accommodates an additional 330,000 gallons when you account for 85% of the storage being available. “We’ve also gained some efficiency,” Overpeck noted. “We plan to further increase our efficiency by adding bobtails with two inlets to load twice as fast.”

Additional benefits include the ability to provide more summer work for employees as 36 more loads can be put into the company storage during the summer months. In addition, Overpeck Gas has a transportation business which hauls nearly 15 MMgal./year to other retail propane companies. “We never lift gas from our own storage for the transportation of wholesale propane to other retailers, but our additional storage gives us more flexibility to skip a scheduled load to our own plants to take care of an immediate need for another retailer.”

With one winter under their belt, Overpeck said he and the other stockholders are pleased with their decision to add the storage. “We were our own cavalry that came to save us,” Overpeck said. “I’ve never had a congressman show up with a semi to help us out. I’m not crazy about having to rely too much on others to save the day when propane inventory becomes tight.” —Pat Thornton