Key Numbers To Watch Vary By Company and Current Goals

(January 22, 2020) — Recent supply challenges in Iowa and across the Midwest serve as a reminder that retail propane marketers can enjoy much greater success if they are making decisions based on real-time market knowledge. “Buying the cheapest posted price on a given day isn’t always the best strategy,” said Marty Lerum, managing partner at Propane Resources (Mission, Kan.). “Supply security is also extremely important, even if it means paying a little extra.”

Key business numbers propane marketers must watch to stay profitable reports BPN industry leading source for news since 1939Lerum feels that retail marketers need to be aware that with a changing marketing environment, some producer/wholesalers are opting out of doing small contracts and spot loads for retail propane marketers. “They are focusing more on selling larger volumes to larger buyers that will guarantee a rate of return on their investment,” he said. “This puts more risk on the retail propane marketer. While we produce more propane than ever before in the U.S., the propane distribution system is actually less flexible to deliver to the ‘retail propane industry.’ Investments have been made to redirect the flow of propane to the export market and the retail propane market and the companies that have made those investments need a return on those investments! Now in December we have propane prices in Conway and Mont Belvieu at 50 cents per gallon and propane postings in parts of the Midwest from $1.00 to $1.90 per gallon. There is a reason for that and if you are a propane retailer and don’t understand why, we’d advise finding someone that can explain to you how to avoid the latter in the future.”

Managing supply both for retail companies operated by Propane Resources as well for as other clients, Lerum believes that while there are key numbers, such as EBITDA (earnings before interest, taxes, depreciation, and amortization), that every business owner should track, the key numbers for retail propane marketers will vary, usually based on the level of sophistication of the company and the type of customers they serve. “For retailers, business goals should tie to key numbers that should be monitored. Each strategy for growing revenue will have key numbers that should be monitored.”

Gross Margin
“Gross margin is king,” said Walt Colburn, an analyst who assists Lerum in tracking key numbers. “By the time you are doing annual financials, it is too late to learn that you are losing money.” Colburn tracks the gross margin for all profit centers for each retail operation. “The recent grain drying demand is a good example of a profit center that should be tracked,” he said. “It is easy for retailers to get caught up in the quick demand and needs of the farmers. All costs, including the propane, delivery, administrative expenses, tanks in the field, and other equipment, must be considered. This will help in deciding on future marketing programs for grain drying. It may be determined that your cost to service a customer is not allowing for enough gross margin to make some grain drying accounts worthwhile. Sometimes it’s better to let a customer find another supplier so you can focus on the profitability in other areas of your business.”

“Too much investment in high-volume, low-margin accounts often can cause problems in the retail propane industry,” Lerum said. “The desire to increase gallons regardless of gross margin is a common bad habit.” He noted that many successful retailers have mastered the importance of owning the tanks at the customer site and being able to fill them at any time. “Let’s say a retailer has 1400 residential customers, each with a 500-gallon tank. Considering you could fill each tank to 85%, you can control about 600,000 storage gallons in the field instead of working with only 30,000 to 60,000 gallons of plant storage,” he explained. “The control over 600,000 gallons of customer storage will lower a propane retailer’s delivered cost! For propane retailers, getting to the point where they can control their customer’s storage will take marketing programs that their employees can quickly and easily explain the benefits to their customers, such as Budget Plans with an incentive for the customer to join. Tracking key numbers in getting to this point is important. There are many benefits to building company value and increasing efficiency associated with owning and controlling the delivery schedule to tanks at customer sites.”

“Having key numbers at your fingertips in real time can help you when faced with the possible need for a new employee, a new bobtail, or many other investments,” Lerum said. “If you can’t justify the investment, it is better to know that on the front end and avoid wasting time and money.”

Customer Retention
In Michigan, Chris Caywood, president of Caywood Propane Gas, Inc. (Albion, Coldwater, and Hudson, Mich.) says tying the key numbers he looks at to his goals has been a strategy since he came back to run the family business six years ago. “We have shifted our focus more heavily toward customer service, digital migration, and value-pricing,” Caywood said. “We believe that sustainable, profitable growth ultimately depends more on customer retention than new customer growth. That’s why run-outs, delivery performance, on-time service call arrival, answering the phone, first-call resolution, and the convenience of online options are so important. Almost every retailer says they have great service at great prices. Fact is, most retailers really have no empirical idea whether they do.”

“Data is helpful only if it helps you understand whether you’re making progress toward your goals. For example, most retailers have a basic idea of their gallons/delivery and gallons/hour,” Caywood said. “We know exactly how much our margin improves when we improve our gallons/hour, so we can evaluate the financial return on investments that drive gallon/hour increases. Our ultimate goal is to empirically connect these metrics to customer service performance and customer retention using some basic regression models.”

Caywood acknowledges that this all sounds kind of nerdy, but he doesn’t feel there is anything nerdy at all about figuring out how much each operating button he and his staff push moves the customer retention needle. “We’re excited about figuring out which buttons are more important, but we’re even more excited about discovering which buttons really don’t move the needle at all or, worse yet, adversely impact retention.”

“The key tools are technology, engaged employees, and staying on message,” Caywood said. “When we started down this road five years ago, we did not have the technology tools or level of employee engagement that we have today. We invested heavily in both. Five years ago, we did not have a health care plan, retirement plan matching, profit-sharing contributions, or paid time off. You can spend a fortune on technology, but you’re not going to get much out of it if you don’t have the talent to use it to its fullest. You also need to spend time cheering, coaching, and reminding the team why you’re doing it. We’ve only recently recognized the importance of the cheering, coaching, and reminding and have started investing more time in it.” — Pat Thornton

Grant Funding Available For Propane Autogas Vehicles, School Buses

(January 21, 2020) — The Diesel Emissions Reduction Act (DERA) provides funding for private- and public-sector fleets to replace aging diesel trucks and vehicles in an effort to reduce harmful Greenhouse Gas Emissions (GHG) and other harmful pollutants emitted by dirty diesel engines. Funding applies to vehicles Class 5 and up, including transit and school buses. Nationally, approximately $44 million will be available in grant funding. The Environmental Protection Agency (EPA) Region 7 (Kan,, Mo, Neb., Iowa), predicts about $3.2 million in federal funding, with a limit of $1.5 million on any single application.
 
EPA logoDERA allows a variety of approaches to cutting emissions and saving fuel. Participants can swap old for new diesel, but can also choose cleaner fuels, such as propane autogas, natural gas or all-electric options. Participating organizations can receive reimbursements of up to 25% for the costs of new diesel, CNG, or propane vehicle. However, choosing the Near Zero gaseous fuel engine certified by the California Air Resources Board increases reimbursement percentages to 35%, while fleets selecting zero-emission electric or fuel-cell options receive 45% of vehicle costs. 

DERA also funds off-road equipment, stationary generators and pumps, and marine diesel engines, as well as engine retrofits, replacements and rebuilds, aerodynamics and shore power. Propane autogas vehicles and school buses qualify for grant funding with near-zero harmful emissions.

Application packages must be submitted electronically to EPA through Grants.gov (www.grants.gov) no later than Wednesday, February 26, 2020, at 11:59  p.m. (ET) to be considered for funding.

The deadline for submitting questions is February 14, 2020 at 4 p.m. ET. The final Questions and Answers document will be posted on February 19, 2020 at 4:00 p.m. All questions and answers, including those from all webinar information sessions, will be added to this document.

Eligible Applicants Include:
The following U.S. entities are eligible to apply for DERA National Grants:
  • Regional, state, local or tribal agencies/consortia or port authorities with jurisdiction over transportation or air quality
  • Nonprofit organizations or institutions that represent or provide pollution reduction or educational services to persons or organizations that own or operate diesel fleets or have the promotion of transportation or air quality as their principal purpose.
  • School districts, municipalities, metropolitan planning organizations (MPOs), cities and counties are all eligible entities to the extent that they fall within the definition above.
Please refer to the full RFA for specific information about this competition.

Eligible Uses of Funding:
Eligible diesel vehicles, engines and equipment include:
  • School buses
  • Class 5 – Class 8 heavy-duty highway vehicles
  • Locomotive engines
  • Marine engines
  • Non-road engines, equipment or vehicles used in construction, handling of cargo (including at ports or airports), agriculture, mining or energy production (including stationary generators and pumps).
Grant funds may be used for diesel emission reduction projects including:
• EPA verified technologies or certified engine configurations
• California Air Resources Board (CARB) Exit verified technologies or certified engines
• Idle-reduction technologies that are EPA verified
• Aerodynamic technologies and low rolling resistance tires that are EPA verified
• Early engine, vehicle, or equipment replacements with certified engine configurations

Funds awarded under this program cannot be used to fund emission reductions mandated by federal law. Equipment for testing emissions or fueling infrastructure is not eligible for funding.

Please refer to the full RFA for specific information about this competition.

Grain Drying Demand, Early Cold, Spawn Propane Supply Challenges

(January 21, 2020) — Heavy rains produced record flooding in the Midwest in early 2019, wreaking havoc in communities and on farms. Sustained precipitation caused marked postponements for crop seeding in the spring, and many acres weren’t planted at all. Fallout from the flooding hit again in the fall and produced severe propane distribution constraints throughout America’s Breadbasket.
Challenges Caused by flooding, late grain drying Sets Up Propane Supply Issues for lpg retailers in winter 2020 reports BPN industry leading source for news since 1939
Farmers who earlier struggled for months with swamped fields, fewer planted acres, and commodity price uncertainty now endured the multiple challenges of a delayed, wet harvest and the early onset of cold temperatures and snowfall. Mother Nature determined that record levels of prompt propane were needed to dry sodden grains at harvest time, and just for good measure swept the Heartland with cold and snow so space heating demand for people and farm animals alike would ramp up concurrently.

“A multitude of factors contributed to the supply challenges in the Midwestern states,” observed John Powell, senior vice president and head of Kansas City-based Crestwood Services’ Marketing, Supply, and Logistics Group. He said these included refinery turnarounds and outages, unexpected and extended colder-than-normal weather, a lack of contingency storage barrels, and strong crop drying demand due to a late planting season. Adding to the harvest woes were the high moisture content of corn coming out of the field, allocation on pipelines, and contingency supply points 50 to 200 miles further away than normal. All these conspired to stretch trucking capacity. And to boot, Canadian National railway workers called a strike and walked off the job, stranding propane railcars along its network.

“The colder-than-normal start to the winter season caused a dramatic increase in demand, both for heating and crop drying, along with several production issues, creating the perfect storm for a short-term supply shortage,” Powell adds. “Generally speaking, the supply constraints are now largely resolved.”

TO THE RESCUE
All that being said, marketer frustration mounted, with significant irritation directed at the wholesale side. Noted by several in Iowa was a reported change in policy by one leading wholesaler. “Some producer/wholesalers are opting out of doing small contracts and spot loads for retail propane marketers,” said Marty Lerum, managing partner at Propane Resources in Mission, Kan. “This puts more risk on the retail propane marketer. While we produce more propane than ever before in the U.S., the propane distribution system is actually less flexible to deliver to the retail propane industry.”

“My phone is ringing a lot less. It was a fairly quiet weekend,” said Deb Grooms, CEO of the Iowa Propane Gas Association, just after Thanksgiving. “No one called to say people or animals are cold, but there remains a lot of corn to dry.” Grooms, who spent most of late October and all of November dealing with retail challenges, made two trips to Washington, D.C., on behalf of Iowa marketers. Although she said she was finally seeing light at the end of the tunnel, for her association membership December still brought with it difficulty in procuring product. There was, however, a sense the perfect storm was steadily coming to an end.

U.S. Department of Agriculture data obtained and distributed by the National Propane Gas Association (NPGA) estimated the U.S. harvest was 86% complete as of Nov. 25. A five-year average for Iowa shows the crop usually at 97% complete by that date. “Iowa bore the brunt of the challenges,” said Jeff Petrash, NPGA vice president and general counsel.

NPGA MEETS WITH FERC
Through numerous discussions with Grooms, Iowa Gov. Kim Reynolds and her staff, and the Iowa congressional delegation, Petrash and NPGA staffers were able to arrange a meeting with the Federal Energy Regulatory Commission (FERC) Nov. 25. FERC is the government agency that regulates the interstate transmission of electricity and movements of fuels. For only the second time in history the agency worked with pipeline operators to expedite propane batch deliveries to Iowa. It acted in a similar manner during the winter 2013-2014 logistical difficulties.

A Nov. 27 memo of talking points for state propane associations prepared by NPGA stated that FERC had initiated an alternative dispute resolution process with pipeline companies on Nov. 19. Shippers and their representatives were therefore able to explore actions to alleviate propane pipeline constraints in the Midwest. Accepted was a proposal from Enterprise Products (Houston), owner and operator of many U.S. pipelines, to provide emergency transportation of propane to the Midwest for a 30-day period.

In addition, a Nov. 25 FERC meeting that involved representatives of Enterprise TE Products Pipeline Co. LLC, ONEOK North System LLC, NPGA, the Iowa Propane Gas Association, the Association of Oil Pipe Lines, and shippers was held to examine possible actions. NPGA thereafter reported that Enterprise would file to extend its emergency propane service. It also reported that ONEOK would file a tariff revision temporarily waiving restrictions on its allocation policy to allow qualified shippers to transfer allocated capacity, thereby facilitating prompter shipments. The FERC discussions were confidential. Further details were not released.

Meanwhile, NPGA reported the Federal Motor Carrier Safety Administration would continue to lift hours of service restrictions for Midwest states, including Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and Wisconsin through Jan. 10.

By early December, whether through warmer temperatures, the end of crop drying drawing near, FERC actions, or likely a combination of all, Petrash said he noticed his email inbox was no longer flooded. “Since March of 2019, Sarah Reboli, Lesley Garland, and I had been watching the Midwest crop situation along with PERC’s Michael Newland, who oversees ag issues,” he said. “We have been communicating with FERC, the Midwestern Governors Association, NASEO [National Association of State Energy Officials], our state propane associations, and our membership about concerns throughout the year. We’ve stayed in regular communication with these organizations since the problems in 2014.”

At the same time, NPGA issued talking points directed to consumers, government officials, and media, namely, there is not a propane shortage in the Midwestern United States. There are limits on the safe transportation of propane from supply points, as well as limits on pipeline capacity. The U.S. continues to be a net exporter of propane and there is more than enough to satisfy customer demand. Talking points also observed that some propane marketers had sold up to five times more propane over a month’s time compared to the same time a year earlier. The deliveries were primarily for crop drying and other agricultural heating needs, as well as serving the needs of residential and commercial customers.

NPGA emphasized it is important for consumers to communicate with propane suppliers in advance to ensure they have what is needed, when it is needed, especially if they do not have a contract with a supplier or have not scheduled deliveries. “To understand the demand from corn and grain drying, consider that your typical home that uses propane for space heating, water heating, and cooking might use around four to five gallons every day,” the association explained. “But some of these grain dryers are using nearly 18,000 gallons every day. That volume of gas requires two tractor-trailer loads of gas every day.”

CHALLENGES AND CONCERNS
Jay Christie, energy development specialist at New Century FS (Grinnell, Iowa), is president of the Iowa Propane Gas Association. He said he and the association leadership took seriously the decision to contact Iowa’s governor and the state’s congressional delegation to seek help. “We don’t want to ask for help unless it is really needed, and in this case help was definitely needed.”

He pointed out that northeast Iowa was hit the hardest. One company slammed was Three Rivers FS (Dyersville, Iowa). Dani Ling, energy marketing manager, agreed that it was a tough fall. “We’ve had days where we could have used 25 loads but only got 13 loads,” she said. “We averaged about 13 loads per day in November and had trucks going to Monee and Morris near Chicago; Conway and Hutchinson in Kansas; and Oklahoma and Arizona.” In 2014, Three Rivers FS even trucked in some loads from Texas.

Ling added the company rationed propane in some areas this fall. “There were days we had to shut down some dryers to make sure home heat and hog house customers were taken care of. We sometimes limited drivers to delivering no more than 600 gallons per day, short-filling customers with enough to get by for a short period.” She acknowledged some efficiencies were lost between the cost of extra trips associated with short-filling and spending 20 cents to 50 cents per gallon more for propane to be trucked in from longer distances.

Terry Davis of Country Propane in Milo, Iowa said that he always stresses there is a plentiful supply of clean-burning, easily transported propane. He tells his customers not to read too much into the hype on the news until he communicates a concern to them. “As an industry, we often respond with reliable propane to fuel generators for short-term issues like hurricanes and tornadoes,” he said. “Where natural gas and electricity fail, propane picks up the slack. Crop drying is a similar circumstance where propane can resolve a short-term problem, but it often gets a black eye when transportation can’t keep up.”

Davis said the industry has done a good job of increasing storage at various customer sites. In many cases, 320-gallon tanks have been replaced by 500-gallon containers. In turn, 500-gallon vessels have been replaced by 1000-gallon tanks. However, he expressed concern that, too often, government stands in the way of boosting storage. “In Indianola and Warren County, it is next to impossible to add storage due to zoning conditions,” he said. “Meanwhile, crop drying equipment is faster and more efficient, but that means using up the propane faster and faster.”

And if extended travel is required to obtain more and more propane, the shortage of drivers is another big challenge for the industry. “We’ve got to legalize 18- and 19-year-olds receiving licensing to drive hazardous materials,” Davis said. “By the time they’re 21, the legal age, they are often already settled into another job.”

While Davis lauded the efforts of the Iowa Propane Gas Association, he said he is concerned that propane distribution issues arise about every five years. And each time the propane industry must work with new people in leadership positions at various government agencies. “Getting all the right people educated every time these situations arise takes time, and when propane is not moving fast enough a week can seem like an eternity. I’d like to see some policies and procedures in place where government assistance kicks in more automatically for cutting hours of service requirements and prioritizing propane on the pipeline.” — PAT THORNTON

EPA Seeks Comments on Cleaner Trucks Initiative Proposal

(January 20, 2020) — The U.S. Environmental Protection Agency (EPA) is soliciting pre-proposal comments on a rulemaking effort known as the Cleaner Trucks Initiative (CTI). This Advance Notice of Proposed Rule (ANPR) describes EPA’s plans for a rulemaking that would establish new emission standards for oxides of nitrogen (NOx) for highway heavy-duty engines. It also describes opportunities to streamline and improve certifcation procedures to reduce costs for engine manufacturers. The EPA is seeking input on this effort from the public, including all interested stakeholders.

EPA requests comments on clean air initiatives for near-zero propane autogas vehicles trucksThe purpose of the CTI is to update EPA emissions standards for NOx and potentially other criteria pollutants from highway heavy-duty vehicles and engines. In this ANPR, EPA provides stakeholders with our early thinking on CTI principles and program elements and solicits stakeholder input on preliminary plans for analyses and data to inform the upcoming notice of proposed rulemaking (NPRM).

Streamlining and Modernizing Heavy-Duty Emissions Regulations.
EPA is actively exploring opportunities to streamline our requirements, while ensuring no loss in protection for public health and the environment. For instance, we are working with industry partners to develop a more cost-effcient path for manufacturers to demonstrate the durability of their emission control systems. The ANPR describes several other areas that EPA is evaluating for streamlining and modernization, and requests comment on additional opportunities we could consider.

Improving Real-World Emissions Testing. Today’s in-use testing standards require manufacturers to collect emissions data from heavy-duty vehicles on the road in the real world. Our analysis suggests there may be great potential to improve in-use performance by considering a broader range of engine operation when we evaluate in-use compliance. The ANPR describes our current thinking on potential updates to the in-use testing program and requests comment and data on all aspects of this topic.

Updating Laboratory Test Cycles for Heavy-Duty Vehicles. Based on our early analysis of heavy-duty diesel engine technologies, we expect today’s advanced diesel technologies are capable of substantial emission reductions on current laboratory test cycles. We are considering an additional laboratory-based test cycle that would evaluate an engine’s control of emissions during conditions not emphasized in today’s test cycles, such as low-speed, or low-load operation. The ANPR describes our current thinking and requests comment on this topic.

Providing Additional Assurance of Emissions Controls through Extended Useful Life and Emissions Warranty Provisions. Our current analysis shows that heavy-duty engines operate well beyond EPA’s current defnition of the engine’s regulatory full useful life. EPA’s current emission warranty provisions cover only a small fraction of an engine’s operational life. In order to ensure that emission controls continue to perform over a period more refective of the real-world operational life of heavy-duty engines, we are evaluating longer mileage requirements for regulatory useful life and emissions warranty. The ANPR describes our early thinking on this topic and asks for stakeholder input.

Working Towards a 50-State Approach for Heavy-Duty Vehicles. EPA is closely following the technical work initiated by the California Air Resources Board (CARB) to update their heavy-duty vehicle and engine programs under a Heavy-Duty NOx Omnibus proposal. The ANPR provides an opportunity for comment on the extent to which EPA should adopt provisions similar to those expected in the CARB Omnibus proposal.

Public Participation Opportunities:
The EPA welcomes your input on this Advance Notice. Comments will be accepted for 30 days following publication in the Federal Register. All comments should be identifed by Docket ID No. EPA-HQ-OAR-2019-0055 and submitted at www.regulations.gov. For additional submission methods, please visit www.epa.gov/dockets/commenting-epa-dockets.

For More Information:
You can access the ANPR and related documents on EPA’s Cleaner Trucks Initiative webpage at:
  • www.epa.gov/regulations-emissions-vehicles-and-engines/cleaner-trucks-initiative
You can also contact the National Vehicle and Fuel Emissions Laboratory (NVFEL) Library for document information by email at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 734-214-4311.

In Memoriam: Sam McTier

(January 20, 2020) — The propane industry morns the loss of Samuel E. McTier, 93, an elder statesman of the propane industry and longtime member of the National Propane Gas Association (NPGA). McTier died peacefully on January 11, 2020, in Lake Forest, Illinois, where he was a longtime resident. Born in El Paso, Texas, on June 16, 1926, Sam was a child prodigy, playing the violin and viola at age ten in the El Paso Symphony Orchestra, and graduating from Austin High School in El Paso at 14. He graduated from the University of Colorado in Boulder as a Mechanical Engineer. Sam served both in the Navy in WWII and the Korean War.
 Sam McTier Honored Propane Industry Leader Dies Jan 11 2020 reports BPN industry leading source for news since 1939
In 1946 Sam settled in the Chicago area and began his career in the propane industry with Bastian Blessing. After working as a RegO salesman, Sam eventually founded McTier Supply Company, serving as President and CEO for over 40 years. Upon his retirement, he worked in the industry at Propane Technologies and McTier Consulting. Sam received the Distinguished Service Award from the National Propane Gas Association and the World’s Distinguished Service Award from the World LP Gas Association. In April 2012, Sam was placed in the Inaugural Class of the Hall of Fame by LP-Gas Magazine. He was the only person to receive the Member Emeritus status on the NFPA Technical Committee on LP-Gas. 
 
Sam was a past President of the Bath and Tennis Club of Lake Bluff, IL, where he won their doubles tennis championship and was also nationally ranked in Men’s Senior tennis. He was a finalist for the Poole Cup in golf and a finalist in the singles and doubles squash at the Onwentsia Club, Lake Forest, IL. Sam also served on the Board of the Lake Forest Symphony from 2006-2010. He played the viola in the Lake Forest Symphony and was on the Scholarship Committee of the National Propane Gas Association. 

Sam was preceded in death by his parents, brother Frank McTier and first wife, Ann Heffner McTier. He is survived by his loving wife, Virginia Aldrich McTier, son Brian McTier (Kerry) of Brush Prairie, WA, daughters Dianne McTier Olsen (Clifford) of Lake Bluff, IL, Carolyn McTier Makens (Paul) of Tiburon, CA, grandchildren Annaka Olsen, Christian Olsen, Hanna Olsen Westmoreland (Nikolai), Samuel Olsen, Katherine Gertrude Makens and Kevin Makens. 

The funeral will be held at the Church of The Holy Spirit, 300 E. Westmoreland Road, Lake Forest, IL, at 1:00 PM on Saturday, January 25th. In place of flowers, Memorial Contributions may be made to the Lake Forest Symphony, 400 E. Illinois Road, Lake Forest, IL 60045 or to t he NPGF Samuel E. McTier Memorial Scholarship. Donations in Sam’s name may be made using this form. Donations are tax-deductible.