LP Gas, May 2010

I N F R A S T R U C T U R E Stressed Out Study says more storage needed to ease infrastructure strain BY PATRICK HYLAND Editor in Chief he most thorough analysis ever done on the propane industrys ability to deliver product nationwide underscores the need for dealers to continue adding storage in the New England Mid Atlantic East Central and California regions And since primary storage capacity has dropped more than 798 million gallons in the last decade and remains far from major retail demand areas more primary storage is needed in New England and the Central Atlantic regions the report says The study done by consulting fi rm Purvin Gertz for the Propane Education Research Council verifi es that industry infrastructure is sorely taxed to meet peak seasonal demand during extended periods of severe winter weather The Houston fi rm based its analysis on survey returns from 644 propane retailers with 4 billion gallons of sales volume and 665 million barrels of storage in 2008 When you weigh everything together our infrastructure has pretty much just held pace with the growth in propane demand over the last 10 years Outside of secondary storage additions and new production from shale developments there has not been signifi cant improvement says study author Craig Whitley senior principal at Purvin Gertz Propane retailers have done the best job of all to make improvement by adding signifi cant gallons of secondary storage over the past decade Yet its an area that still needs further improvement since storage capacity growth has slowed with the end of the federal tax credit program to incentivize storage additions LPG production demand by region Regions that have insuffi cient supply from refi neries gas plants and imports represent a combined shortfall of billions of gallons in local demand that must be met by inter regional pipeline rail or transport In fact the study reveals that eight of the nations 11 regions had a net shortage of product to meet demand in a combined 11 billion gallon domestic retail market in 2008 see chart below The East Coast states typically run 175 billion gallons short of supply each year after fi guring average import levels That strains the rail and pipeline infrastructure to meet winter demand along the coast where most common propane supply disruptions have occurred in recent years The Lower Atlantic states Florida Georgia North Carolina South Carolina Virginia and West Virginia are the most heavily dependent region representing 13 billion gallons of product shortfall Although waterborne imports are generated in the region it remains heavily dependent on outside rail and pipeline to provide product New England states Connecticut Maine Massachusetts New Hampshire Rhode Island and Vermont have no domestic production and must rely entirely on imports and pipeline transfers The region is more than 110 million gallons short of demand LOCAL SUPPLY TO DEMAND RATIO Purvin Gertz Inc 22 LPGas May 2010 www LPGasmagazine com