Propane Hub in Connecticut

This article appeared in the March 2016 edition of Oil & Energy:

The propane supply chain in New England is stronger this winter with the addition of a large new propane terminal in Central Connecticut.

Inland Fuel Terminals Inc., a subsidiary of Santa Energy Corp., recently opened a 540,000-gallon facility in Plymouth, CT, a few miles north of Waterbury. The terminal has dedicated railroad spurs to accommodate bulk deliveries from the rich production fields of the nation’s new shale operations. Inland spent five years planning and developing the facility, according to Director of Sales and Marketing Development Hillel Weisel.

Tom Santa, CEO of Santa Energy, explained the company’s vision for the new terminal. “Propane has traditionally been viewed as a premium product serving a niche market. With abundant new supply located closer to the markets we serve, we believe the role of propane in serving the region’s energy needs has changed dramatically,” he said. “While still a premium product, it now has the ability to compete head-to-head with other fuel sources. This development will allow propane to expand market share.”

Propane’s premium status is based on its versatility, strong cold flow characteristics and its capability to support low firing rates, according to Santa. The fuel has traditionally been too expensive to compete effectively with distillates and natural gas, but the price picture is evolving. Fracking operations in the Utica and Marcellus shale regions are yielding large quantities of natural gas liquids, including propane. With more propane coming out of the ground close to New England, rail delivery is emerging as the economical choice, and the marine terminals in Providence, RI and Newington, NH, are seeing their import roles diminish.

“Due to the location of these new sources, the supply logistics to the northeast U.S. are changing,” Santa explained. “We at Inland recognized that this shift meant there would be a need for new infrastructure to accommodate the shift in product sourcing. While we have long experience in marine transportation of petroleum, we understood that propane is most effectively brought to market by rail. We further recognized that for propane to grow market share, it must overcome supply constraints.”

As supply becomes more readily available and marketers and customers learn more about propane appliances and newer applications such as propane Autogas, Santa expects demand to grow. Propane is an excellent replacement for electric heat, he noted, because the equipment can be compact and is easy to retrofit into an electric heat home. “Propane can actually complete with natural gas, but certainly those areas beyond the utility network will be the most prosperous territory,” he added.

New Opportunities

Terminals like the new one in Plymouth reflect the changing face of fossil fuels, according to the Santa Energy CEO. “For us in the industry and for the vast majority of our customers, today’s expansion of domestic oil, gas and LPG production is an incredible blessing,” he said. “It has come at an auspicious time for our country. As our economy struggles and foreign supply is subject to increasing insecurity, the oil industry has produced jobs, lower energy prices and more reliable supply.”

Despite the advantages to consumers, gaining local approval for facilities like this one is not easy. “Unfortunately there are some in our country who do not recognize these benefits and have turned against all manner of energy infrastructure development,” Santa said. “Our Plymouth terminal offers an ideal location in the center of a promising propane market with good rail access in a region where people appreciate reliable, domestic and economic energy supply.”

About five years ago, Inland began planning a new propane terminal and looking for a site that offered access to rail and convenient access for marketers, according to Weisel. The company identified six potential sites and eventually zeroed in on the Plymouth location. The 10-plus-acre site is located within a few miles of Connecticut Route 8 and Interstate 84. It formerly housed Arthur Industries, a maker of temporary buildings such as modular classrooms.

The property had been in foreclosure, and Inland approached the Town of Plymouth about getting a permit to operate the fuel terminal. The town was interested in getting the property back into active use, and Inland worked closely with local officials to address any concerns about safety, traffic and noise, according to Weisel. The site is near the Town of Plymouth transfer station, which means that neighbors are already accustomed to large trucks passing through. The large pumps that move the propane out of the storage tanks are installed some 25 feet underground to give the terminal high output speeds while minimizing noise in the surrounding area, which is sparsely populated with homes.

To help local officials evaluate the project, Inland brought their traffic engineer, project design engineers and other industry representatives to the first public hearing. The company also hosted exercises at the site that attracted 60 firefighters from Plymouth and neighboring communities to practice fighting propane fires. Joe Rose, President of the Propane Gas Association of New England (PGANE). commended the Inland Fuel Terminals team for working effectively with the officials in Plymouth. “They really did their homework at the local level,” he said.

Train Cars and Transports

Oil & Energy recently toured the facility with Weisel and Santa Energy Corp. Propane Division Manager Bill Harris. There is a railroad siding with eight unloading positions that can all operate simultaneously. Tank cars at each position unload and pipe product into six 90,000-gallon storage tanks via underground pipes. A train carrying 240,000 gallons of propane can unload into Inland’s tanks in four hours.

Those tanks, in turn, feed four transport loading stations that are outfitted with grounding systems and PIN code entry. Transports can take on propane at up to 600 gallons a minute, and Inland can easily load 20 or more transports a day during peak season. The facility is designed so that transports can drive in on one end, proceed straight to the loading positions and exit the other end of the facility without ever backing up or turning around.

Inland has an agreement with Pan Am Railways to deliver a minimum of eight tanker cars of propane three times a week. Inland also has a storage agreement with Pan Am to maintain an inventory of rail cars within their local rail system. On short notice these cars would move to the terminal quickly in times of high demand. This strengthens Inland’s ability to maintain uninterrupted service to its customers. The company aims to move product through the facility briskly, unloading and loading as much as 60 million gallons in a heating season.

TransTech Energy, of Rocky Mount, NC, provided the massive 90,000-gallon tanks and arranged for them to be transported to Plymouth one at a time by truck and installed them in two groups of three tanks each. Underground pipes connect the tanks to the rail unloading points and the transport loading points. The tanks are interconnected, so that a rail car can unload into any tank from any unloading position.

Inland also had to install more than 1,600 feet of railroad track to bring the rail cars onto the site. Weisel said it was fascinating to watch the construction of the train tracks, which was done using specialized equipment that bends the rails on site as needed and shakes them so the rock bed can settle evenly underneath.

Santa said the facility meshes very nicely into the Santa/Inland business plan. “Inland Fuel Terminals Inc. is one of the foundation companies of Santa Energy,” he explained. “For over 50 years, Inland has served the New England wholesale petroleum market. We have developed a reputation for adding value in a fiercely competitive marketplace. Our philosophy is to work closely with our wholesale customers to help them succeed and to help the industries we serve to grow and prosper.”

Based in Bridgeport, CT, Santa Energy Corp. is the parent company of Inland Fuel Terminals, Santa Fuel Inc., and Santa Buckley Energy. Inland owns two terminals and operates out of three others. The four Connecticut locations are in Bridgeport, East Hartford, New Haven and Wethersfield. There is also a marine cargo terminal in Tiverton, RI. Santa Fuel is a residential oil and propane company serving Fairfield and New Haven counties. Santa Buckley serves commercial and industrial customers throughout New England.

Easing Supply Constraints

Access to propane supply has sometimes been a challenge for New England marketers, particularly in stretches of extended cold weather such as the region experienced in the winter of 2013-14. PGANE’s Rose said the region’s struggles have been more about transport than supply. “There is plenty of propane around, just not where we need it,” he explained. In 2014-15, propane terminals in Providence and Newington increased imports to meet the spiking demand. “We have been encouraging people to add storage, and we have tried to find more ways to get storage into the Northeast.” That includes supporting Crestwood Midstream Partners’ proposed 2.1 billion barrel LPG storage facility in Watkins Glen, NY and Sea-2 Inc.’s plan to deliver U.S.-produced propane by rail to its Newington, NH terminal.

Rose is confident that the Sea-3 plan will eventually be approved. “It is just a question of how long the opponents can delay it,” he said. “The company has approval from the Town of Newington.” The City of Portsmouth is fighting the Sea-3 plan at the behest of activist citizens who oppose rail transport of propane, even though propane is already moving safely on rail through the region, he added. If Sea-3 and a propane terminal in Providence, RI can both take propane by rail and store it, the region’s propane storage problems will be virtually eliminated, according to Rose.

The new Inland Fuel Terminals facility is a nice addition to the region’s supply chain, the PGANE executive said. “This one is huge. It puts a good amount of product in storage in the central Connecticut. I don’t think Connecticut had a single propane terminal in the whole state. If you can buy gas in Connecticut and market gas in Connecticut, that is huge.”

Facilities like the new Inland terminal can help marketers find the propane they need in winter without having to drive hundreds of miles, according to Rose. In recent winters, some marketers have sent trucks as far away as Texas to get the propane their customers need.

Many marketers have helped themselves in recent years by adding storage at the company level. In fact, construction companies that install large propane tanks are booked straight for a year trying to meet marketers’ needs, according to Rose. Even as they are increasing storage, however, many marketers are also increasing year-round propane sales. “New England continues to be the only region that is consistently growing,” he added. “We continue to show 7 to 9 percent growth year after year.”

Marketers in New England have also gotten better at promoting summer fills so that there is more propane in customers’ tanks going into the winter. Rose estimates that 85 to 90 percent of marketers have their propane heat customers on automatic delivery. “We have marketers who won’t take will-call customers,” he said.

Despite all the supply and storage improvements, marketers could still find themselves scrambling in the event of another extreme cold spell. “Every new wholesale facility and every new retail marketer building in supply is making our preparedness better,” Rose said. “If we can get Finger Lakes [Crestwood] and Sea-3 approved, I would say we’d be in great shape.”

Crestwood Still in Limbo

Crestwood Midstream Partners is still awaiting a decision from the New York State Department of Environmental Conservation on its plan to store propane in underground salt caverns. Jeff Petrash, Vice President and General Counsel of the National Propane Gas Association (NPGA), told Oil & Energy that his association continues assisting Crestwood. “The proceeding grinds on,” he said. “I think we are now in Year Five.” Josh Fox, the producer of the documentary Gasland, which targeted natural gas fracking, has taken an interest in gas storage and was arrested in May for protesting at the Crestwood site. Fox and other anti-fracking activists have begun targeting fossil fuel infrastructure projects such as pipelines and storage caverns.

Petrash said that retailers and customers across the northern United States responded to the challenging winter of 2013-14 by increasing storage capacity and getting tanks filled before the winter. “What that amounted to was prepositioning propane going into last year’s winter,” he said. Credit for the increased awareness goes to retailers and state officials and not to NPGA, he said.

There have been significant changes in propane market dynamics since 2014, according to the NPGA official. Propane inventories are at record highs going into winter, and propane prices have dropped. “Two years ago it was almost entirely an infrastructure problem,” he said. “The propane was in the wrong places.”

That winter made federal and state officials much more aware of propane supply dynamics. “We actually got three propane bills through Congress,” Petrash said. “Those events really increased the awareness of propane.” As a result, state officials can now waive Hours of Service restrictions for propane delivery and transport drivers, and the U.S. Department of Energy is tracking propane inventories and reporting to state officials at the first sign of trouble.