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November 27, 2012

Propane glut clouds Searsport storage plan

The proposal for a facility to accept imported liquid propane even as the price plummets raises questions about its future.

By Tux Turkel
Staff Writer

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CHS Inc.'s new rail facility in the Biddeford Industrial Park can store 180,000 gallons of propane and move 20 millions gallons a year into Maine. The project is an example of how energy companies are responding to the glut of low-cost propane in the Northeast.

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DCP Midstream is jointly owned by Spectra Energy and ConocoPhillips. It operates small storage and distribution terminals along rail lines in Auburn and Hermon. Searsport would be the first storage tank in Maine large enough to hold more than a week's worth of winter capacity.

Propane is transported in refrigerated vessels and kept in a liquid state. The tank in Searsport could hold the contents of a cargo ship, typically 15 million gallons. Ships would likely come from Europe, loaded with North Sea gas.

Maine now burns more than 115 million gallons of propane a year. Most of it arrives by rail from western Canada, a two-week trip. Some comes from a pipeline near Albany, N.Y., and is trucked north. In the past, southern Maine's supply also came by ship, to a 25 million-gallon tank farm in Newington, N.H.

But Paul Bogan, vice president of the Sea-3 propane terminal in Newington, said he received only one ship this year and has none scheduled so far for 2013. For now, the terminal is unloading propane from rail cars into tank trucks.

"We're hoping the market reverses itself next year," Bogan said.

But the region is likely to have an oversupply of domestic propane until at least 2014, and perhaps beyond 2015, according to a new study done for the Propane Gas Association of New England.

"Right now, bringing it across the sea doesn't make economic sense," said Joe Rose, the group's president.

The study shows that propane imports from Canada and overseas fell 60 percent in the past seven years.

The region's reliance on domestic propane, delivered by rail, has downsides, the study notes.

The import terminals in Providence and Newington have served as primary storage facilities, offering a supply cushion during winter cold snaps, or when severe storms threaten to disrupt or delay rail deliveries. Marine terminals have been part of the industry's "three-legged stool," along with railroads and the New York pipeline.

"Now, the stool is down to two legs," Rose said. "Terminal storage was a comfort. But that's not going to be there this winter."

Seeing opportunity in the new market conditions, propane dealers are building and expanding bulk storage. The study counted more than 40 projects with capacity of more than 30,000 gallons under way this year in New England and New York. In Maine, NGL Energy Partners, the new owner of Downeast Energy, is upgrading a 210,000-gallon rail storage facility in Portland.

"A good start," the study says. "But we need to have a minimum of 40-plus projects each year over the next five years to add more bulk-storage capacity."

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

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