LPG: New England’s Propane Supply Riskiest in the Country

VERSATILE RAILROADING MASKS REGIONAL WEAKNESS DUE TO DISTANCE FROM PRODUCTION, LIMITED TRANSPORTATION, SEASONAL SWINGS.

Energy security is an annual challenge in the northeast. In particular, New England relies heavily on LPG (propane) for residential and commercial heat. Uniquely among the propane market regions, New England possesses no propane production or propane pipeline connection to other regions. One hundred percent of New England’s propane supply is imported by rail and ship, is distributed exclusively by rail to bulk terminals throughout the region, and finally delivered to end-users by rail and truck.

New England’s propane insecurity is apparent in a Propane Supply Chain and Infrastructure Assessment conducted by Houston-based energy supply consultancy RBN Energy, and published by the Propane Energy & Research Council (PERC). The assessment confers a Propane Supply Reliability Index score on eight regions, which RGN identifies as presenting a better “propane picture” than the federal PADD map.

U.S. regional PSRI scores
New England’s nation-highest propane supply risk is illustrated by its nation-lowest 4.8 PSRI score.
PSRI score ranges 3 to 30; a higher score = less risk, lower score = more risk. Regions are scored 1 – 10 on each of three variables:
Adjacency: Proximity of a market region to that region’s sources of supply.
Diversity: The number of different supply sources for that region, incorporating diversity in individual supply points and available transportation/storage alternatives. 
Seasonality: Relationship of high/peak season demand to low season demand, based on average level and range of heating degree days in a region. {RBN Energy}

Revised New England propane terminal map
Alone among the regions in the nation, New England has no indigenous LPG production, AND no pipeline terminals (The yellow line, left, is the Selkirk terminus of the TEPPCO pipeline). The bulk of supply arrives in the region by rail from other regions and Canada, thanks to major expansion of rail-served facilities since 2006. Rail cars also comprise a large percentage of storage capacity and delivery miles. As late as 2011, as much as 40% of regional supply arrived by ship. {RBN}

List of New England propane terminals
New England relies on efficient rail movement among numerous terminals to distribute and store the vast bulk of the region’s propane supply. Grafton & Upton Railroad has even entered the propane distribution business with a modern terminal in No. Grafton MA, taking advantage of its connection with CSX, which brings TEPPCO-piped propane into the region from Albany NY. {RBN}

NE-propane consumption and demand sectors
New England propane consumption declined in 2019, due largely to supply limitations. Use patterns are also distinct from other regions in the high percentage of commercial demand. {RBN}

More competition for supply

New England has no regional propane production, no pipeline delivery terminals, limited storage capacity, and is 100% reliant on imports from other U.S. regions (55%) and overseas (45%; includes Canada). Growing export demand and flat production from the adjacent Mid‐Atlantic region could squeeze New England supply later in 2021. Maritime imports into Newington NH and Providence RI may partially offset the shortfall. It also may be possible to redirect Marcus Hook PA exports to cover regional shortfalls, however complexity and cost of such transactions may be prohibitive.

Northeast LPG exports
Surplus overflow rail supplies from Marcellus/Utica and Alberta/Edmonton were reduced significantly when new export capacity came online. Export capacity is being expanded at both Marcus Hook PA and Newington NH. Mariner East 2 pipeline deliveries into Marcus Hook increased between 2X and 3X in mid-2019. {RBN}

Short-term supplies high

As of this month, New England propane inventories are approximately double what they were this time last year.

U.S. EIA PADD 1A Y/Y inventory tracking
Heading into Winter 2020-21, New England propane inventories are nearly double the historical average. {U.S. Energy Information Agency}

U.S. EIA terminal price tracking