While national issues such as the 50-cent-per-gallon credit for propane autogas have attracted attention in the propane industry, work is also taking place at the state level to help propane marketers run their businesses more profitably and serve customers better. Many propane marketers and suppliers serve as association board members on a volunteer basis to make sure propane earns a seat at the table when it comes to enacting favorable state legislation benefiting propane marketers in various ways.
Pre-buy legislation is one of those issues. The Propane Gas Association of New England (PGANE) continues to monitor legislative activity in that area for all six New England states. Norm Guerette, general manager for Dead River Co. (Portland, Maine), who currently serves as chairman of the board for PGANE, mentioned a New Hampshire law that legislators changed last year to allow prepaid contracts to be solicited only after May 1 each year. PGANE supported the change as an added layer of protection for consumers.
“Now we’re just abiding by the current regulations and monitoring what might be proposed in the various state legislatures and deciding whether or not we’re in favor of them,” Guerette said.
PGANE’s work in this area is an example of how state associations’ work benefits propane marketers. State associations are working on numerous issues as the new year begins.
Western Association: Preparing the Industry for Cap-and-Trade
The Jan. 1, 2015 compliance date for California’s cap-and-trade program has passed, and although the impact on propane pricing was not yet known at press time, the Western Propane Gas Association (WPGA) is working to keep its members informed and make sure they are ready for price increases. AB 32, the California Global Warming Solutions Act of 2006, requires a sharp reduction of greenhouse gas (GHG) emissions in California. The regulation authorizes the annual collection of a fee from large sources of GHG emitters. WPGA is also working to provide details to consumers that AB 32, which the state’s voters approved, will result in price increases that will likely be passed down to the end users.
The association held a conference call in late November to address the issue. Participants included more than 20 members, a WPGA legislative lobbyist and an association attorney. The association suggested several steps to deal with the issue, including encouraging propane companies in California to contact their state assembly and senate representatives to ask them to sponsor legislation in 2015 to end or delay the program. WPGA will also send a letter to the California Air Resources Board (CARB), which is the agency overseeing the cap and trade program, noting the problems that propane companies are facing in California because of the uncertainty of pricing. The association will also continue to be active with the Fed Up at the Pump coalition, which includes the California Independent Oil Marketers Association and the Western States Petroleum Association, as they work to achieve change with this program.
“We’re letting our customers know how difficult it’s going to be,” said WPGA chair Bruce Thompson of Energy Insurance Services (Phoenix). “California is going to be the trend-setter. Other states need to be very aware of this. It will be coming their way soon.”
WPGA is working on additional issues, such as the national 3% average annual decline in propane use over the past few years that is affecting WPGA members as well. The group believes the drought that the region has experienced during the past few years is a good opportunity to sell propane-fueled agricultural irrigation engines, and the Western Propane Education & Research Council (WPERC) is working on promotional tools geared toward farmers. Thompson added that the WPGA’s Clean Fuels committee continues its ongoing work to reduce CARB regulations and promote propane autogas. WPGA members have been traveling to engine fuel events, promoting the use of propane.
Thompson also led the association’s effort to find a replacement for association president and CEO Lesley Garland, who left for a position with the National Propane Gas Association (NPGA). The group hired Joy Alafia, former director of business products with the California Association of Realtors, as the new WPGA president and CEO.
Louisiana: Making Sure Propane Has a Voice
The Louisiana Propane Gas Association (LPGA) always keeps a close eye on national and state-specific propane-related legislation, but the association also monitors general small business regulations as they affect LPGA members. The group is paying close attention to tax extender legislation that would include the 50-cent-per-gallon alternative-fuel tax credit and the infrastructure tax credit. In December, the credits were extended to the end of 2014, but uncertainty exists regarding how Congress will act on the issue this year.
“But we’re always looking at small business regulations, as they affect our members as much as the fuel regulations,” explained LPGA president Bryan Cordill of Cordill Propane (Monroe, La.). One of those is Section 179 of the IRS tax code that tax extender legislation would make permanent. The section allows businesses to deduct the full purchase price of certain equipment purchased or financed during the tax year.
Funding the activities of the state’s regulatory agency, the Louisiana Liquefied Petroleum Gas Commission, is a more propane-specific activity of the association. Most of the commission’s activities are funded through license fees collected through a percentage of retail and wholesale propane sales. The commission has experienced budget shortfalls as of late, and LPGA is working to help the commission stabilize its budget. “If we have large variations in weather or cost, those fees can go up and down somewhat unpredictably,” Cordill noted. “So we are working with them to try and stabilize without a net increase in dealer fees.”
The association has also been active as a stakeholder with the Louisiana Clean Cities coalition, helping to guide the coalition’s conversations to include propane. “We do that to make sure propane autogas has a voice,” Cordill said. To keep propane at the forefront of people’s minds when thinking of alternative fuels, the association places demonstration vehicles at the coalition’s Alt Fuel Day events. LPGA executive director Randy Hayden has served as a keynote speaker at a quarterly coalition stakeholder meeting.
Cordill noted that the association is monitoring the continued trend of consolidation in the industry, with the number of independent propane marketers in steady decline. He believes that the increased cost to operate a small business is a main reason for the consolidations. His company, Cordill Propane, is one of those small independents, and it’s doing well, with revenues up over last year. “We sell a good amount of hearth products and what we call ‘burner tips’ so customers have something to use their propane in. We continue to market those.”
Texas: Supply Still an Important Issue
With the Mont Belvieu propane storage location and various additional supply points located in the state, Texas survived last winter’s supply and infrastructure problems in fairly good shape. But having all that supply kept state propane officials busy as out-of-state transporters, primarily from the Midwest, flowed into Texas to load their trucks with product. All those out-of-staters meant Texas officials were busy enforcing Department of Transportation licensing requirements and Railroad Commission of Texas (RRC) regulations.
Propane marketer Todd Dorris of Roadrunner Energy (Uvalde), president of the Texas Propane Gas Association (TPGA), noted that the association helped the out-of-state companies secure emergency allowances to help propane marketers elsewhere.
According to Dorris, the association is not doing much differently this year. “After last winter, in Texas and across the nation, people have realized storage and education of customers is needed, and people have stepped up to secure storage and supply sooner,” added Dorris, whose company, Roadrunner Energy, sells strictly propane.
On the regulatory side, the association’s Technology and Safety Committee is working on complying with the most recent versions of NFPA 58, the Liquefied Petroleum Gas Code; and NFPA 54, the National Fuel Gas Code. The state operates with the 2008 version of NFPA 58 and the 2006 version of NFPA 54, so the association is working with the RRC to consider adopting the current versions of those codes.
TPGA is also monitoring challenges to legislation, stating that the RRC has the ultimate authority when it comes to propane in Texas. RRC rules supersede rules of a local jurisdiction. Challenges could come during the next legislative session starting in March from entities such as city councils or firefighter associations. Dorris can sympathize with both sides of the discussion because he serves as a volunteer firefighter in Uvalde.
“I think from a safety standpoint in Texas, we’re pretty safety conscious. We’ve never had any major issues with safety concerns when it comes to propane.”
New York: Projects Include Storage, Supply, Transport
The New York Propane Gas Association (NYPGA) recently completed a two-year strategic planning process that NYPGA president Rick Cummings notes will help the association keep pace with the industry and ensure the association provides its members with all the tools they need to succeed.
As a result of that process, Shane Sweet recently joined NYPGA as executive/technical director. He will join current executive director Barb Roach to help ensure propane is kept at the forefront of energy growth in the state.
NYPGA continues to work actively with Crestwood Midstream to win approval for its Finger Lakes LPG storage project. This project has languished with the New York Department of Environmental Conservation and Gov. Andrew Cuomo’s office for more than five years.
“We feel that infrastructure projects like this are vital to ensuring a steady and economical flow of propane to New York residents and the Northeast,” Cummings stated. “The NYPGA has teamed with Crestwood to provide press conferences, radio appearances, bill stuffers, letters, and more, all to support approval of this important project.”
In addition, as winter approaches, Cummings said the NYPGA continues to foster its cordial and productive relationships with members of the propane supply and transportation industries. The association meets regularly with members of the trucking, pipeline, rail, New York State DOT, and other organizations vital to propane supply needs in the winter months. “We have found that keeping these lines of communication open is extremely valuable when it comes to solving supply issues as they arise,” Cummings noted.
Kansas: Leak Tests, Irrigation, Membership
Safety is a common theme of propane gas associations, but the Propane Marketers Association of Kansas (PMAK) is expanding its work in that area to focus even more on safety and compliance at the customer level. More specifically, the association is encouraging propane technicians to conduct leak tests on all customer out-of-gas calls, said David Perkins, area sales manager for Bergquist (Toledo, Ohio), who is PMAK president.
Various insurance companies are encouraging marketers to perform leak tests every five years and to perform leak tests on out-of-gas calls to determine if a leak caused the customer to run out of gas.
The association has been promoting its safe appliance installation program. In addition to providing a rebate for customers replacing existing appliances with propane appliances, the program encourages propane appliance installers to perform a leak test at the time of installation.
“But it’s also there to promote propane,” Perkins explained. “The program is being promoted heavily and will be promoted heavily next year, and if it’s successful, it will continue.”
The association is also encouraging marketers to persuade farmers to use irrigation engines and is planning events for farmers to learn about the benefits of those products.
Association membership numbers have declined as a result of mergers and company closures, resulting in less dues money coming in to the association. Participation in association activities and programs is lower when fewer independent marketers are involved. Raising dues or restructuring are two options that have been considered.
PMAK is also looking to provide additional services to members, such as educating them on better methods of collections and receivables. “I think collections is always an issue anytime you’re in business, but more so last year with the high fuel costs,” Perkins noted.
New England: Infrastructure and Attracting Talent
In addition to its work mentioned earlier in monitoring pre-buy legislation activity, PGANE has supported various infrastructure projects that will affect New England, such as the permitting of a propane storage cavern in the Finger Lakes region of New York. PGANE is also backing the expansion of the Sea-3 terminal in Newington, N.H., which is in the middle of a zoning ordinance fight. “We’re supporting them getting their retrofit program in place so they can handle more rail product,” said Norm Guerette, PGANE board chairman.
Infrastructure is a top activity of the association, but the group is also working to attract young talent to the propane industry. PGANE is attempting to persuade students of trade schools, trade high schools, and vocational schools to consider the propane industry as a career choice. The group is building a database listing those schools and checking to see if they have HVAC or similar programs. PGANE also seeks to serve as speakers at school career days.
“We’re trying to make the propane industry a little more high-profile and gain some exposure with students getting out of trade school and looking for a career.”
Supply, logistics, and infrastructure are always among the top issues of concern for PGANE. With the newfound abundance of product, the infrastructure has not caught up with the supply. Getting all that gas to where it’s needed the most is an ongoing challenge, he added.
“That was part of the issue last winter in the Midwest,” Guerette stated. “Suppliers just couldn’t get enough gas to the Midwest. As an industry, we have some logistical issues to solve.” He noted that his company in December just opened a new plant with 30,000 gallons of storage in Bridgeton, Maine.—Daryl Lubinsky