New Tools Help Marketers Plan For Increased Ag Propane Demand

New Tools Help Propane Marketers Plan For Increasing Agricultural LPG Uses and other PERC ag initiatives(September 14, 2020) — As winter approaches and supply appears to be tightening, retail marketers have been concerned about the level of propane demand for grain drying. Recently BPN caught up with Michael Newland, director of agriculture business development at the Propane Education & Research Council (PERC), for a discussion of crop drying prospects and an update on other PERC agriculture initiatives. 
 

“This appears to be setting up to be a normal dryer season,” Newland said. “From Indiana back to the Dakotas, the corn belt is at average corn moisture. Earlier planting and average to dryer-than-average moisture indicates this will not be a high demand dryer season for propane.”

The only caveat as we spoke was fallout from the devastating derecho with 100 mph winds on Aug. 10 in Iowa, Nebraska, Illinois, and southern Wisconsin. “There was a lot of damage to the corn crop,” Newland pointed out. “The key question is how many stalks were broken and not just pushed over. If the crop had a lot of damaged stalks, air flow will be hampered and more drying will be needed. The crops that were just pushed over will probably rebound just fine. It may be several weeks before we have a good feel about the damage across several states and how it may impact dryer demand.” Newland is working with University Extension workers who will help assess the damage and impact on propane demand.
Propane Agricultural Uses Rapidly Increasing and AG PROPANE DEMAND GETS A PLANNING TOOL reports BPN 09 2020
NEW PERC TOOLS FOR ESTIMATING DRYER DEMAND
“After a heavy 2019 dryer season caused supply strains in Iowa and surrounding states, PERC created a tool for farmers to help them estimate their propane needs for drying,” Newland said. “The tool is a calculator at propane.com that asks users to input corn acres, expected yield, and points of moisture desired to take out. While not designed to be a calculation of propane needs to the gallon, it can be a great help with planning.”

“Another new tool is designed for internal use by propane state execs,” Newland said. “It tracks planting dates, moisture of rainfall, and minimum-maximum temperatures for days.” This tool requires a code as it is not available to those outside of the propane industry due to a contractual agreement between the vendor and PERC. “The program includes 19 years of historical data by crop district and a tutorial is provided. Once people start using these new tools, they use them a lot.”

OTHER PERC AG INITIATIVES
“New uses in agriculture for propane to help cut emissions in California are notable,” Newland said. “Propane could be a potentially big player in soil steaming, a process that kills weeds, bacteria, fungi, and viruses and is less intrusive and better for air quality than using soil fumigants.” He added that more propane irrigation engines are being used as well as propane-fueled weed flaming technology. “Innovative heat treatment processes also represent another opportunity for propane. The process of thermaculture, which blows high-temperature heat into the crop canopy to control fungus and insects, started in the vinyards in California but is now also being used on row crops of vegetables. Studies have shown thermaculture to be a non-chemical approach that is just as effective but much less costly than using pesticides.” — Pat Thornton

"The State Of Energy" Propane Podcast Gains In Popularity

Last fall, Tom Clark attended NPGA and PERC meetings and heard talk of the need to educate consumers and mobilize them to oppose the war on fossil fuels. Returning home, the executive director of the Rocky Mountain Propane Association (RMPA) reached out to a media organization he’d worked with and discussed how they could talk to consumers about energy choices.
State of Energy Podcast by Rocky Mtn Propane Assoc gains in popularity across USA

The advertising and media-placement agency, Advoke Media, suggested an infomercial-style radio show. “I was surprised; I thought radio was old school,” Clark tells BPN. But he learned that in rural areas of the four states RMPA represents (Idaho, Montana, Utah, and Wyoming), a lot of people listen to radio. “This is something no one had done before—an infomercial about propane—so I thought it would be a new way to reach people.”

The first episode of “The State of Energy” was broadcast March 31. It is currently broadcast on five talk radio stations in the states RMPA represents. Clark co-hosts the 30-minute show with Rand DeWitt, who is with Advoke Media and has been a professional host. “He grew up in the radio industry,” Clark says. “He keeps things fun and keeps things moving.”

As they sought a way to keep a library of the episodes, they determined that a podcast platform was a good way to do that. That led to another surprise: “The show is now worldwide,” Clark says. “I don’t know how they learn about us, but we’ve had listeners from 18 countries and more than 200 cities. It’s not just one-time hits, they return.”

They also found that the podcast was being given by propane company owners and managers to staff who don’t get to travel to association meetings to hear about industry issues. “Middle management, drivers, and service technicians don’t go, yet they are the face of the company,” Clark notes. “We encourage them to listen and hear how to have a propane conversation with their legislators and community leaders.”

When he spoke with BPN in late August, Clark had been doing the weekly show for five months. Knowing their audience now includes both consumers and propane professionals, the hosts choose topics that will appeal to both. Propane’s contributions to resiliency, energy security, and energy diversity are often mentioned on the show. Other recurring themes include RMPA’s workforce development program and, of course, “Propane Can Do That.”

Clark says, “When people hear I host a propane podcast, they say, ‘What in the world are you going to talk about every week?’ You’d be surprised! In almost any news story, you see how propane is involved or how propane could help.”

The State of Energy podcast can be found on podcast apps and on the show’s dedicated website, www.thestateofenergy.com.

If you’d like to sponsor the radio show or podcast, be a guest on the show, or help get the show broadcast in your area, contact Tom Clark at This email address is being protected from spambots. You need JavaScript enabled to view it..
— Steve Relyea

NPGA Offers Propane Supply Advice As Winter 2020-21 Approaches

The National Propane Gas Association (NPGA) released a statement on June 2 from its Propane Supply and Logistics Committee and Suppliers Section regarding supply concerns many retailer marketers were having: “Over the last few months, many of you reported to NPGA that you were experiencing challenges in securing supply for the upcoming harvest and winter. NPGA’s Propane Supply and Logistics Committee and NPGA staff investigated these concerns and determined that for the first time in recent memory, it has become a ‘seller’s market’ for propane, notwithstanding the dramatic increase in propane production over the last decade.”
NPGA Offers Winter 2020-21 Propane Supply Advice to LPG Marketers with a White Paper reports BPN 09-2020

The association listed these factors for the current situation:
  • Relatively low crude oil and natural gas prices;
  • Declining rig counts for both oil and gas;
  • The Saudi Arabia-Russian dispute leading to the world being awash with crude oil;
  • The subsequent drop in oil prices;
  • The dramatic COVID-induced declines in demand for motor gasoline, jet fuel, and diesel fuel; and
  • Refineries consequently ramping back production.

The statement went on to say: “At this time, information from IHS Markit and the U.S. Energy Information Administration estimates there is enough propane supply to meet domestic needs and export volumes, despite the global factors. Some of you have reported that in some circumstances, sellers are unwilling to commit to the same contractual agreements as in the past. These conditions mean some marketers may need to look to new sources of supply to meet their needs, transport supply from greater distances, and consider paying higher costs to secure supply.”

NPGA suggested marketers review their supply and logistics planning for the fall and winter and use two NPGA-developed resources for members on their website: the “Supply Planning White Paper (6/2020)” and the “ABC’s of Supply Preparation.”

NPGA’s “Supply Planning White Paper (6/2020)” is based on the vast experience of many Working Group members, who elaborated on three key suggestions as well as a few others. Those of note include: Make sure you have more than one propane source to rely on; storage buys you days, sometimes many days that you really need, making it a great investment; and it is important to have access to enough trucks to move supply from faraway supply points.

In referring retail marketers to this 2013-14 white paper, NPGA believes the strategies that were recommended in a tight market then would be strategies to utilize in a tight market now. The NPGA recommendations are not designed to be a “one size fits all” approach, it notes.

“The white paper from 2013-14, available to members on the NPGA website, is actually the 15-page set of recommendations condensed from a 200-page document prepared after all of the challenges from the ‘Polar Vortex’ season,” said Jeff Petrash, NPGA vice president and general counsel. “We knew we would see tightness again in coming years and the recommendations are still very applicable in today’s market situation.”

Highlights include demand forecasting: This can be done by considering past gallon sales and a review of future weather forecasts, among other factors. NPGA suggests utilizing of 60-, 30- and 15-day weather forecasts to modify supply plans, if needed. While most market planning is based around the concept of a normal winter, a marketer should also be more flexible and consider the possibility that warmer-than-normal and/or colder-than-normal temperatures may occur, so planning should include options for wet propane that can be acquired under conditions of market stress. Making changes to a supply plan, even only 30 days out, can mean the difference between success and crisis for a propane retailer. More tools to help gauge agriculture demand are now available from the Propane Education & Research Council (PERC) for crop drying (see p. 34). Supply contracting is another key area: Retail propane marketers need to be savvy, the white paper states. Prior experience; reputation in the industry; a supplier’s asset strength and underlying financial capability; and recommendations from other customers should all be evaluated.

Some questions NPGA recommends a marketer ask when interviewing a prospective supplier include:
  • What winter-to-summer ratio can you provide?
  • What alternatives or back-up supply can you provide?
  • Can you tell me where the propane is coming from, and is this source reliable?
  • Will you commit contractually to deliver the supply I need?
  • Can you assist me with transportation if I need it?
  • How strong are you in the region where I buy propane and do you have a reliable source of supply?
The role of propane brokers was discussed by the Working Group, who agreed that brokers play a valuable role in making markets for propane and assisting marketers in meeting their supply needs. Brokers, however, do not control the assets for propane production or transportation and are reliant on asset-based upstream companies for their supply. It was concluded that marketers who are solely reliant on brokers for their supply must have a firm understanding of where the supply is coming from and may be placing themselves at additional risk.

The white paper suggests that marketers must understand the details of earning winter volume on pipelines as most supply contracts include winter/summer ratios. A typical example is a marketer may “earn” two gallons of winter or peak season volume for each gallon purchased in a summer/low season. Marketers should understand the issue of allocation, a situation where product is rationed or limited during a peak period. Even when a pipeline system has enough product, individual suppliers may invoke their own allocation when they have inadequate supply to meet their customers’ needs.

Another key issue addressed: How much of projected demand should a marketer commit itself to for contracting purposes? In this context, the term “contracting” means a firm commitment by the marketer to purchase and the supplier to deliver the product at a given place in a certain timeframe. It does not necessarily mean that the price is fixed or locked in. Pricing and the basis of pricing are separate issues.

After considerable discussion, the Working Group came to agreement that a marketer should contract for approximately 50% to 70% of its supply as long as there is firm demand for the product. This range of 50% to 70% allows for some reduction in perceived demand due to warm weather or reduced crop harvest conditions. For areas where supply is difficult to source in winter or where outages are common, marketers should consider contracting at the higher end of the range.

Before finalizing any agreement with a supplier, it is critically important to know the answer to these questions:
  • What obligations does the buyer have to purchase the product, by month or season?
  • Does the buyer have to purchase the total volume if weather is warm, and can it purchase extra volumes during cold period?
  • What seasonal ratios will the seller give, and are they providing the buyer with the full allocations they earn from the buyer’s business on a given system?
  • What recourse does the buyer have if a supplier defaults, and what can the seller do to the buyer if it fails to perform?
Third-party advice is often very useful in agreeing to supply contracts. Preparing contingency plans and building diversity into the supply plan is critically important. The group stressed that the supply landscape is changing and the need for a well-conceived and executed supply plan is more critical than ever. New propane export capabilities and higher demand and prices for propane overseas now means that surplus propane can be shipped away during the summer as traditional heating demand abates while production continues at a steady pace.

The challenge of transportation: Marketers must decide whether to own their own transportation assets, to subcontract this role to outside contractors, or to have a blend of the two. If subcontractors are used, they must be assessed for reliability and performance just as core propane suppliers. If a marketer needs extra propane to meet seasonal or emergency demands, it may need to travel long distances to obtain it. Marketers should have discussions with carriers about the potential for traveling to distant storage caverns or other supply points if the need arises.

Storage, another major issue: Storage is encouraged at major primary storage facilities, which generally consist of underground salt domes or caverns that serve as main repositories for propane storage in the U.S. Because these facilities have tremendous scale economies, primary storage is generally less expensive on a per-gallon basis than bulk plant storage.

Buying liquid propane in primary storage has a two-fold effect. It offers protection for supply needs, but it also serves as a long hedge, meaning that the price of the product is established in advance of its anticipated need. Of course, locking in the price can have both a positive or negative outcome, depending on whether the product price moves up or down at the time of retail sale.

Marketer plant storage is an asset that may be needed in higher volumes in some areas than others. Marketers near major propane storage centers or pipeline systems may not need as much plant storage as those far away from such facilities. Many marketers see storage as a key strategic asset, offering both the opportunity to store gas at favorable pricing and the ability to withstand short-term supply shortages with a cushion of extra propane.

Customer storage, or tertiary storage, is an important part of the supply situation. A study released by PERC in 2011 estimated that there was 111 million barrels, or approximately 4.7 billion gallons, of customer storage in the field, nearly equaling the total amount of primary storage capacity in the U.S. The study also concluded that the average tank size for domestic customers was 400 gallons. The sheer volume of customer storage in the field underscores the importance of filling customer storage prior to peak season demand.

All marketers are urged to implement programs aimed at ensuring customers are full prior to peak demand. Areas of focus should include: eliminating “will call” accounts; creating budget/pre-pay/or metered programs to eliminate credit concerns; offering promotional pre-season fill rates; and working customers on scheduled routes

The Working Group notes that while there are challenges to modifying established practices and consumer behavior, one great benefit of succeeding with these changes is that they have the effect of increasing supply capacity with no additional capital investment.

The highlights presented here are not inclusive of all recommendations by the NPGA Working Group. The document can be found by NPGA members at npga.org. — Pat Thornton

Propane People "In The News"

Propane People In The News Paraco Propane Welcomes LPG Acquisitions team Carl Kaplan rpts BPN 0820(September 7, 2020) — Carl Kaplan has joined Paraco Gas Corp. (Rye Brook, N.Y.) as a business development associate for the company’s Mergers and Acquisitions team. Kaplan has 20 years of experience in marketing and business development, which will help the family-owned and operated company to identify and pursue potential acquisition opportunities. He was previously a business development executive in mergers and acquisitions at Ferrellgas.
Propane People In The News Paraco Gas Welcomes VP Kevin Watson CFO to Board rpts BPN 0820
Joseph Armentano, CEO and chairman of the board of directors of Paraco Gas Corp., has appointed Christina Armentano and Kevin Watson to its board, joining its present board of three independent directors.
Propane People In The News Reports Christina Armentano joins Paraco Propane Board of Directors BPN 0820
Christina Armentano, executive vice president, sales and business development, joined Paraco in 2014. She is a member of the executive team.
Kevin Watson joined Paraco Gas as CFO in 2018. Also a member of the executive team, he is responsible for the financial structure of the company.








IN MEMORIUM:
Sue Gampp, an ADD Systems (Flanders, N.J.) employee since 2001, passed away May 20. She began as a trainer in the Implementation Department, then shortly moved to the newly formed Projects Group, a team created to assist clients with large or unique projects. In 2015, she was promoted to manager of the group. More recently, she was instrumental in the creation of ADD’s Wholesale Group, a team focused on the application of ADD software for customers with wholesale petroleum divisions.

Send your company's "Propane People In The News" and announcements to This email address is being protected from spambots. You need JavaScript enabled to view it..

New Director Brings Energy Agency Experience To PERC

Using propane in fuel cells, developing commercial applications for lowering NOx and particulate matter (PM) emissions, creating combined heat and power (CHP) solutions for residential applications, promoting propane as a marine fuel to lower carbon emissions in the world’s waterways, and enacting carbon capture processes to eliminate carbon dioxide. These are all subjects Dr. Gokul Vishwanathan has either studied or worked on to develop real-life solutions. They are all areas of interest as the Propane Education & Research Council (PERC) plots its 2020-22 Strategic Plan. Vishwanathan recently joined PERC as director of research and sustainability.
PERC welcomes Dr Vishwanathan to help expand propane's clean energy markets 0820

“We’re happy to bring Gokul on board,” said Cinch Munson, PERC’s senior vice president, business development. “His experience really fits our strategic priorities and what we need to accomplish. Renewable propane, on-road and off-road applications, engine growth opportunities, energy storage, fuel cells, and carbon capture are all key areas we are focused on and Gokul has experience with all of them. He comes in with relationships already built with a lot of experts, and those relationships are very important.” Vishwanathan, a mechanical engineer, joined PERC on May 18 and leads PERC initiatives to grow propane demand through research, technology development, and sustainability programs. He received a master’s degree in mechanical engineering from the University of Alabama and a Ph.D. in mechanical engineering from the University of Wisconsin—Madison.

EXPANSIVE DOE EXPERIENCE
Prior to joining PERC, Vishwanathan worked for Booz Allen Hamilton, where he supported the U.S. Department of Energy’s (DOE) Advanced Research Projects Agency-Energy (ARPA-E) and the Advanced Manufacturing Office (AMO) of the Energy Efficiency and Renewable Energy (EERE) agency as a technical advisor and subject matter expert in connected and automated vehicles, powertrain development including both conventional reciprocating engines and hybrid electric vehicles, CHP, thermal energy storage, and carbon capture technology.

He was a technical specialist at Cummins heading medium-duty and heavy-duty diesel engine development work and advancing novel fuel and air-path calibration mechanisms for diesel engines.

“During the time I worked for the Department Of Energy (DOE), I worked on various programs focusing on the development of internal combustion engines, hybrid-electric vehicles, thermal energy storage, and carbon capture solutions,” Vishwanathan said. “At Cummins, I spent three and a half years doing diesel engine development work.” Discussing carbon capture, he described it as a process of capturing carbon dioxide emissions, usually from large sources, such as a cement factory or a powerplant, and transporting it to a site and depositing it where it will not enter the atmosphere.

PREVIOUS CONTACT WITH PERC
In the process of working at DOE, Vishwanathan came to know Greg Kerr, who was PERC’s director of research and development at the time, and through some mutual projects, he learned about PERC and some of its efforts to generate new uses for propane. “PERC has been looking at a lot of new uses for propane that will increase demand. The role of director of research and sustainability piqued my interest.”

“I don’t believe propane is just a ‘bridge fuel,’” Vishwanathan explained. “It has so many ways it can be a long-term solution. In its liquid state, it stores very well versus other gases. It has a low carbon-to-hydrogen ratio, which means less carbon footprint. It is non-toxic and when combusted, leads to low NOx and PM emissions.” He believes there will be some amount of electrification in vehicles in the future, but that propane will be involved in many hybrid electric vehicles. He thinks that lower emissions and less PM will continue to make propane a great solution for Class 3 to Class 7 vehicles; he sees tremendous potential in the lower end of Class 8 vehicles as well. He noted “Fuel cells are a potential solution for the heavy-duty truck market as well.”

“I think we have an unprecedented situation with COVID-19,” he commented. “Unfortunately, it has impacted our livelihood and it will take some time for our economy to bounce back. But it makes the need for cost-effective propane solutions more critical to provide benefits for many years to come. Electricity and propane will both have its place and they both will be in our palette of solutions. With electrification, the problem of carbon emissions is not yet resolved.”

Working closely with the National Propane Gas Association (NPGA) as well as all propane state associations and other industry stakeholders, Munson noted that PERC has developed data-driven, provocative, assertive messaging about new opportunities for propane. “We have to be competitive when talking about propane in the overall energy portfolio,” Munson said. “PERC has to be engaged with a variety of private and public organizations. It is important that we are involved with these players in the energy field, and I’m glad Gokul is also representing us in the energy conversation. Relationships are important.” — Pat Thornton