City of Knoxville Recognized As 2019 Green Leadership City By Propane Council

WASHINGTON (October 22, 2019) – The city of Knoxville, Tennessee, was recognized as the 2019 Green Leadership City, a distinction awarded by the Propane Education & Research Council (PERC) to one government agency in the United States each year.

Propane Council Awards Knoxville Tenn Green Leadership Award Clean Propane Fleets Reduce pollution 96 percent reports BPN 10 2019Knoxville was recognized specifically for its adoption of clean, propane-powered mowers, among other environmentally friendly programs that support the city’s sustainability and emissions-reduction goals.
 
Mayor Madeline Rogero accepted a $5,000 donation from PERC during a celebration event at Suttree Landing Park with city officials and Public Service Department employees, who operate the propane mowers regularly. The donation will benefit Knoxville’s CAC Beardsley Community Farm, a non-profit based in Knoxville’s Malcolm Martin Park, which is dedicated to promoting food security and sustainable agriculture.

Propane School Bus Rebates Up To $20,000 Available

(October 22, 2019) — School buses travel over four billion miles each year, providing the safest transportation to and from school for more than 25 million American children every day. However, diesel exhaust from these buses has a negative impact on human health, especially for children, who have a faster breathing rate than adults and whose lungs are not yet fully developed. Diesel buses not only emit harmful particulates, they are also noisy, don't easily start in cold weather, require more maintenance, and have a much higher cost of ownership.

School bus generic imageThe Diesel Emissions Reduction Act (DERA) of 2010 allows the Environmental Protection Agency (EPA) to offer rebates, in addition to grants, to reduce harmful emissions from older, dirtier, harmful diesel vehicles. The rebate program has funded vehicle replacements or retrofits for almost 2,000 vehicles to date.

The 2019 DERA School Bus Rebates will offer over $10 million to public and private fleet owners for the replacement of old diesel school buses with new buses certified to EPA's cleanest emission standards. EPA will award selected applicants $15,000-20,000 per bus for scrapping and replacing old buses. Eligible replacement buses include clean, quiet, economical propane autogas.

Deadline for emailing applications with scans of bus titles and registrations to This email address is being protected from spambots. You need JavaScript enabled to view it.: Wednesday, October 30, 2019 at 4:00 p.m. ET.

Propane School Bus Rebates Up To $20,000 Available

(October 22, 2019) — School buses travel over four billion miles each year, providing the safest transportation to and from school for more than 25 million American children every day. However, diesel exhaust from these buses has a negative impact on human health, especially for children, who have a faster breathing rate than adults and whose lungs are not yet fully developed. Diesel buses not only emit harmful particulates, they are also noisy, don't easily start in cold weather, require more maintenance, and have a much higher cost of ownership.

School bus generic imageThe Diesel Emissions Reduction Act (DERA) of 2010 allows the Environmental Protection Agency (EPA) to offer rebates, in addition to grants, to reduce harmful emissions from older, dirtier, harmful diesel vehicles. The rebate program has funded vehicle replacements or retrofits for almost 2,000 vehicles to date.

The 2019 DERA School Bus Rebates will offer over $10 million to public and private fleet owners for the replacement of old diesel school buses with new buses certified to EPA's cleanest emission standards. EPA will award selected applicants $15,000-20,000 per bus for scrapping and replacing old buses. Eligible replacement buses include clean, quiet, economical propane autogas.

Deadline for emailing applications with scans of bus titles and registrations to This email address is being protected from spambots. You need JavaScript enabled to view it.: Wednesday, October 30, 2019 at 4:00 p.m. ET.

Propane Market Flips From Backwardation To CONTANGO

(October 21, 2019) — By J.D. Buss…

In October 2018 we wrote about a “tectonic shift” that had taken place in the propane markets during the last two years. What was that shift? The forward propane price curve changed from a traditional contango market—meaning future prices are higher than current prices—to a backwardated market, where current prices are higher than future prices.
J.D.Buss explains what the contango propane market means when future LPG prices are higher than current prices reports BPN propane industry trusted source for propane news since 1939
Fast-forward to the current situation and we view another shift in the propane forward-price market, where a traditional asset has come back into prominence and a slew of infrastructure plays are helping to give a future view on the propane marketplace.

“Follow the Money!”
The oft-used expression, “follow the money,” can help explain where domestic propane product is moving and the economic value of that move. The Mont Belvieu graph shows a series of propane forward-price curves for several dates during 2019.

As we moved through calendar year 2019 we see that the propane forward-price curve became more and more contango. A traditional contango market has returned for propane!

Reviewing this in more detail, we see that at the first of August the price for the January 2020 Mont Belvieu contract came in at 53.25 cents/gal. while the August 2019 contract was at 44.50 cents/gal. That differential is 8.75 cents/gal. over only five months. If storage costs for a year are 8 cents/gal.—or 0.66 cents/gal. per month—then the five-month cost of storage would equal 3.3 cents/gal.

When we put all that information together, we see how an individual can make money by placing propane into storage:
  1. Price of August 2019 Belvieu contract (8/1/19) = 44.50 cents/gal.
  2. Assumed cost of five months of storage = 3.30 cents/gal.
  3. Total cost of propane in January 2020 = 47.80 cents/gal.
  4. Sale price in January 2020 on 8/1/19 = 53.25 cents/gal.
  5. Difference: = 5.45 cents/gal.
This is a simplified model, but we can see that a company could make almost a 5.5-cent/gal. profit by merely buying the propane on Aug. 1, selling the future January 2020 Belvieu contract on Aug. 1, and then incurring the cost of storage for five months. By “following the money” we can see why it has proven more beneficial to place propane into storage facilities this summer than to sell propane into the current market.

“Storage Still Rules!
For at least a decade, our team has been advocating storage to our client base. Over that same time, we’ve seen reports and recommendations from trade groups that support propane retail firms adding to their storage capacity. The U.S. propane market has also seen a proliferation of tank monitoring systems with one of the express purposes being to optimize stored volumes.

The backwardated markets that took place in 2017 and 2018 were starting to cause doubt that storage would remain a quality asset for the retail market segment. But the reversal of the price curve to contango, plus the growing levels of exports, continue to support storage as a quality investment.

Over the past five-plus years the mantra of “Growing Exports!” has been heard throughout the propane industry. The question, though, remains how this export growth will impact the retail segment of the domestic U.S. market. The graph below helps to show the overall export growth since 2014 forward using EIA data:
J.D.Buss a propane supply expert in OP, Kan explains contango LPG market means when future propane prices are higher than current prices reports BPN propane industrys trusted source for news since 1939
Combining EIA weekly export and product supplied data, we can create a total weekly demand value for propane. Since 2014, we see that exports have been a larger and larger percentage of the overall weekly demand, while the product-supplied segment has become a smaller and smaller percentage of total demand. What was more intriguing is the fact that the linear uptrend of exports crossed over the linear downtrend of product supplied earlier this year. At the present time, both trends have been in place for multiple years and have not shown any signs of reversing.

Why does this trend support storage assets for retailers? Exports are almost a ratable consumption for all 12 months of the year, they move massive volumes in each transaction, and they garner more of the focus from the producing and midstream markets. In order for retailers to continue to facilitate the traditionally low-summer/high-winter demand of their client base, they will need to rely more heavily on their own asset base—of which storage is a huge part—rather than lean on the historical asset base that has served the U.S. market in prior decades.

“Infrastructure Tells All!”
Following is a very brief outline of upcoming infrastructure projects that will impact the propane and broader NGL markets:
  1. Grand Prix pipeline—Targa Resources’ pipeline running from Stack, Texas to Mont Belvieu with a capacity total of 300,000 bbld
  2. Elk Creek pipeline—ONEOK’s pipeline running from the Bakken area to Colorado with a capacity of 400,000 bbld
  3. Arbuckle II pipeline—ONEOK’s pipeline running from Oklahoma to Mont Belvieu with a 500,000-bbld capacity
  4. Enterprise export expansion—a buildout in Q3 2019 of 175,000 bbld and then a projected expansion of another 260,000 bbld in Q3 2020. Total capacity would be approximately 1.1 MMbbld.
  5. Targa export expansion—adding another 130,000 to 140,000 bbl/month of capacity in Q3 2020
  6. Targa fractionation expansion—an additional 320,000 bbld of capacity at Mont Belvieu
  7. Phillips 66 fractionation expansion—an additional 300,000 bbld of capacity at Sweeney, Texas in 2020
JD Buss President Twin Feathers Propane supply consulting firm tells BPN that the PROPANE MARKET has FLIPped FROM BACKWARDATION TO CONTANGO October 2019In this extremely brief list, we see three major factors:
  1. Large amount of investment dollars.
  2. Large amount of new capacity volume—regardless of whether it is pipeline, fractionation, or export.
  3. All these projects point to getting more volumes to the U.S. Gulf Coast region, specifically Texas.
The short version of this section can be summed up with a simple phrase: it is clear more propane production is coming.

A year ago the propane price curve was backwardated, and bullish sentiment had driven prices to increase nearly 300% from the January 2016 low. Fast-forward 12 months, prices have lost almost all of that previous gain and the price curve has flipped back to traditional contango. Exports are not showing any signs of stopping and massive investment dollars are pointing to huge future propane supplies. As the domestic retail demand segment shrinks further into the background, it is becoming vital for retailers to focus on the following:
  1. Gain a better understanding of the influence of global markets on U.S. propane supply and cost.
  2. Gain greater control over their supply chain.

J.D. Buss, CPA and CTA, of Overland Park, Kan.-based Twin Feathers Consulting, has been working with propane clients over the last 10-plus years to devise and implement both hedging and supply strategies. Buss' extensive industry experience includes working at Koch Industries and Enron in risk management and marketing/trading roles. A former small business owner, he brings accounting knowledge and operational experience to the Twin Feathers team and client base. He may be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..

Spending Decline For Winter Heating Fuels Reported; 15% Decline For Propane

(October 18, 2019) — The Energy Information Administration (EIA) expects that average expenditures for the major home heating fuels will decline for most households this winter compared to last year, owing to warmer forecast temperatures across much of the country. The agency’s Winter Fuels Outlook notes, however, that changes in household heating expenditures vary significantly by both fuel choice and region. For the average household, EIA expects that both natural gas and electricity bills will decline by 1%, fueloil by 4%, and propane by a marked 15%.

WinterWeather 1But in contrast to the national average, EIA forecasts that expenditures will increase for homes that heat with natural gas in the Midwest and South as a result of higher retail natural gas prices. And although the lower average expenditures forecast largely reflect warmer temperatures this winter compared with the winter of 2018-2019, a colder-than-average winter could result, leading to increases in expenditures.

In addition, retail fueloil prices could rise above those forecast because of ongoing uncertainties. For example, there is unpredictability regarding the effect global sulfur restrictions on marine fuels that go into effect in January will have on world distillate fuel markets. In addition, distillate fuel inventories in the Northeast, the main residential fueloil market, are low heading into winter.

Based on the most recent forecast of heating degree days (HDD) from the National Oceanic and Atmospheric Administration (NOAA), EIA expects temperatures for winter 2019-2020 to be warmer than last winter for most of the U.S. On a national-average basis, temperatures last winter were slightly colder than the most recent 10-winter average. HDD are an approximate measure of how cold temperatures are compared with a base temperature—more HDD indicate colder temperatures. On average, EIA expects total HDD for this winter across the nation to be 4% less than last winter. However, the forecast varies among U.S. regions and forecasts range from 7% fewer HDD than last winter in the Midwest to no change in HDD from last winter in the South.

EIA adds that although NOAA forecasts temperatures this winter to be warmer than last year, recent winters provide a reminder that weather can be unpredictable. The winters of 2013-2014 and 2014-2015 were generally colder than normal, but the winters of 2015-2016 and 2016-2017 were much warmer than normal. Recognizing this potential variability, the Winter Fuels Outlook includes scenarios where HDD in all regions are 10% colder or 10% warmer than forecast.

About 5% of all U.S. households use propane as their primary space-heating fuel and many of these are in the Midwest and Northeast. EIA expects these households to spend 15% less on average for heating this winter compared with last winter, but forecast changes in expenditures vary by region. The agency expects that households heating with propane in the Northeast will spend an average of $228, or 12%, less this winter than last winter, a result of prices that are 10% lower and average household consumption that is forecast to be 3% less than last winter. EIA expects households in the Midwest to spend an average of $236, or 17%, less this winter, reflecting average prices that are about 12% lower than last winter and consumption that is down 6%.

Similar to fueloil, changes in wholesale propane prices pass through relatively quickly to retail propane prices and many propane users buy supplies ahead of the winter and refill as needed. When forecasting expenditures, EIA does not account for the fact that propane consumers purchase fuel ahead of its use. EIA assumes consumers pay the prevailing retail price at the time fuel is consumed.

In the 10%-colder-than-forecast scenario, EIA’s expected expenditures for propane are about the same as last winter in the Northeast, with prices that are 16 cents/gal., or 5%, lower than last winter and consumption that is 5% higher. Forecast expenditures in the cold scenario are $108 more than last winter in the Midwest, reflecting prices that are 11 cents/gal., or 6%, higher than last winter and consumption that is up 2%.

In the 10%-warmer-than-forecast scenario, EIA’s forecast expenditures are $486 under last winter in the Northeast, reflecting prices that are 54 cents/gal., or 17%, lower than last winter and consumption that is 11% under. Forecast expenditures are $332 lower than last winter in the Midwest, reflecting prices that are 22 cents/gal., or 12%, lower than last winter and consumption that is 14% lower.

As of Sept. 30, propane spot prices at the Mont Belvieu hub were nearly 60% lower than at the same time in 2018. EIA expects residential propane prices to be lower this winter compared with last winter because of lower crude oil and natural gas prices that feed into weaker prices for retail propane, and because of more abundant propane supplies nationally. EIA’s propane price forecasts reflect inventories that are above average in most regions of the U.S. going into the winter season and U.S. propane production growth that is expected to continue to outpace domestic and international demand growth.

Propane inventories typically build between April and October and begin drawing down in late-September or October when agricultural use rises and temperatures begin to drop. U.S. propane, including propylene, inventories were at 100.6 MMbbl on Sept. 27, which was 15% higher than the five-year average for that time of year. The high U.S. inventories were primarily the result of stocks in the Gulf Coast that stood 23% higher than the five-year average. Further, inventories were well above average in most regions, with the exception of the Midwest, where volumes were closer to the five-year average.

EIA forecasts that U.S. propane production at natural gas plants and refineries will be 12% higher this winter than last winter, total consumption will be 1% higher than last winter, and net exports will be 32% stronger year over year. U.S. consumption and export growth depend on demand for propane as a heating fuel, as a feedstock for petrochemical plants, and as an agricultural fuel. The increases in total consumption and exports are mainly a result of expected growth in the use of propane as a petrochemical feedstock and would be affected by U.S. and global industrial growth. Propane is also used as a fuel for drying agricultural crops, which may contribute to higher-than-forecast Midwest prices if farmers have higher than expected crop-drying demand during the fall harvest.

EIA estimates that U.S. production of propane/propylene was 125,000 bbld, or 6%, higher in the third quarter of 2019 relative to the third quarter of 2018, and propane net exports rose by 85,000 bbld, or 10%, during the same period. Expansion of Enterprise Products Partners’ Houston Ship Channel export facility in the fourth quarter of 2019 could contribute to rising exports in coming quarters.

During this heating season the Northeast region will have an additional source of propane supply when Blackline Midstream reactivates the Providence, R.I. import terminal. In the Northeast, exports leave from the Philadelphia area in the Central Atlantic region, but U.S. imports mostly come into New England.

For its Winter Fuels Outlook, EIA defines the winter season as October through March. The average household winter heating fuel expenditures discussed are a broad measure for comparing recent winters. Fuel expenditures for individual households are highly dependent on the size and energy efficiency of homes and their heating equipment, along with thermostat setting, local weather conditions, and market size.

(SOURCE: The Weekly Propane Newsletter, October 21, 2019, available exclusively by subscription)