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20 MAY 2014 | FUEL OIL NEWS | www.fueloilnews.com FUELS By Keith Reid T he extraordinary winter that just passed focused con- siderable attention on virtually all of the heating fuels. Prices were volatile and at time high, supply was strained regionally or locally, such as natural gas in New York. Heating oil saw price spikes, as did propane with addition- ally some regional shortages. The latter, perhaps, received the most attention and in many ways draws into focus issues that go well beyond the specifics of this winter (or propane itself) and tie into our dynamically and rapidly changing reality as a leading international fuels producer. Fuel Oil News spoke with Richard Roldan, president and CEO of the National Propane Gas Association, about the issues faced this winter, and the current state of our fuels distribution infrastructure. NPGA is the national trade association representing the U.S. propane industry. Its membership includes small businesses and large corporations engaged in the retail marketing of pro- pane gas and appliances; producers and wholesalers of propane equipment; manufacturers and distributors of propane gas ap- pliances and equipment; fabricators of propane gas cylinders and tanks; and propane transporters. FON: This has certainly been an interesting winter, and one that focused plenty of attention on propane supplies. Roldan: We've just had probably the most challenging winter we've faced at least since I've been here for the past 20 years. Look at the unique characteristics — factors that have not existed like that in the 100-year history of our industry. It also underscores the fact of how fundamental the transformation has been in the industry because of all the shale development. That's a positive thing for the United States and a positive thing for our economy, but there are certain hangover aspects as it starts to affect our industry and how we take energy from where it is produced and bring it to our customers. FON: What were the drivers behind the supply issues that were faced? Roldan: There are a couple of things. I try to divide things into two categories: the things you can affect and the things you cannot affect. You can never change the weather, or we'd have it a whole heck of a lot colder in this country. You can't change crop harvests, and you can't change the moisture content of the crops. So, that billion gallons of extra demand this year that came on driven by weather and harvest issues is something we could not do anything about. It was a perfect storm. But, there are the other things that are affecting our markets and our customers that we haven't really talked about before. For almost 100 years we've generally been a propane importing country. Most of the propane that we use in America has been produced in America, and we imported a small per- centage—about 10%—with most of that coming from Canada. But about seven years or so ago we became a propane exporting country, which is very new to us. In the first couple of years we exported about 5% of the product that was produced here, but that has increased over the years so that about 20% of the product is destined for another country. And, our export capacity is growing. Today it is about 5.8 billion gallons and we know that is going to grow. FON: Export certainly is becoming an issue with virtually all aspects of our domestic fuel development, including crude. How specifically did exports play out in the propane market? Roldan: That is a question we are trying to address right now. It's the 800 pound gorilla in the room, and we would like to see the Energy Information Administration, like they did with natural gas, take a look at the question and find out whether or not it is in the national interest to be exporting that amount of propane. We are a free market industry, but we think that somewhere in that continuum from a total ban on exports to completely unfet- tered exports there probably are some reasonably sensible policy options that we ought to consider that will increase our ability to reliably serve our customers. We are focused on that now internally, and we have hired an outside group and we've asked the federal government for its help to research the issue. Once that's done, I think we'll have a good set of policy options to explore. FON: Another issue, of course, is what's happening with the distribution infrastructure. Roldan: Shale development in this country has resulted in the unprecedented production of both natural gas and crude oil. We are the Saudi Arabia of natural gas and propane, as the rest of the world is now learning, and that product is finding a global marketplace. The question is, in our industry, how do we get propane from where it is produced to where our cus- Propane Supply infrastructure This Winter Was a "Perfect Storm," but the Energy Climate Itself Has Changed Richard Roldan, president and CEO of the National Propane Gas Association