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Questions Raised About Searsport Tank Developer's Export Intentions
03/26/2013   Reported By: Jay Field

Members of Searsport's Planning Board will begin final deliberations Wednesday night on whether to approve construction of a 14-story propane tank at Mack Point. As a decision nears, DCP Midstream, the Denver-based company that wants to build the tank, has revealed in a quarterly report that it exported propane from another facility it owns in Virginia. The company has insisted it has no plans to use a Searsport location for exports. But opponents of the project say the availability of cheap propane in New England will force DCP to reconsider its intentions - if the Searsport tank is approved. Jay Field reports.

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Questions Raised About Searsport Tank Developer's Listen

Word of the Virgina shipment came during a DCP conference call on fourth quarter earnings on Feb. 28. Shortly into his presentation, company executive William Waldheim said: "I'm excited to report that we successfully exported 6 million gallons of propane out of our Chesapeake terminal in January. Further work is required to export purity products on an ongoing basis. However, we are encouraged by the commercial results and will continue to explore this opportunity."

Steve Hinchman, of the group Thanks But No Tank, says this admission by the company raises questions about its real intentions in Searsport.

"Even as they were testifying in Searsport that this was an import-only terminal, they were silent on the fact that they were simultaneously converting their Virginia terminal, which is the same size, to exports," Hinchman says.

DCP would not make someone available to talk on tape by airtime. But in an e-mail, Roz Elliot, the company's vice president of public affairs said, "essentially our Chesapeake facility was able to export one load. The Searsport terminal is NOT designed for export. It would have to go through significant redesign and all new regulatory approvals."

But Steve Hinchman thinks the flush domestic market for propane would eventually pressure the company to use a Searsport location to export gas abroad. "The Marcellus and Utica shale gas fields production in Pennsylvania, Ohio, West Virginia and New York is now exceeding total demand in all of the Northeast," he says.

With a surplus of propane selling for a little under $3 a gallon in Maine, Hinchman says there's no longer any need to import gas from overseas.

"That's the fundamental problem that DCP faces in Searsport," he says. "You know, these are publicly-traded companies. They will have an obligation to their shareholders to convert that terminal to its highest and best use. They won't be able to resist that pressure to convert it to export."

But the main propane industry group in New England sees the market dynamics more fluidly. "Five years ago, the thought of the United States exporting propane was - everybody would look at you like you had three heads if you suggested that. So, the reality is nobody can predict what the energy market will look like five years from now," says Joe Rose.

But Rose has nonetheless agreed to give it a try. Rose heads the Propane Gas Associaton of New England. Right now, the rapidly growing natural gas supply has U.S, suppliers pressuring the U.S. Department of Energy to allow them to ship LNG abroad. "We all, in the industry, strongly feel that once we start exporting natural gas it's going to drive the price up," he says.

Rose says he eventually expects the price of propane on the U.S. and world markets to narrow. Right now, the prices are about a dollar apart.

"If we got that down to, say, 25 or 30 cents, it would be absolutely economical for propane companies that sell to retail customers to have a quantity of propane contracted at a facility like Searsport, so that the gas is on hand, in Maine and available in the winter time when their customers need it," he says.

Rose says retrofitting the Searsport site to export propane would cost DCP Midstream as much as $40 million. The company's terminal in Chesapeake, Virginia, he notes, is a lot closer to the Northeast shale gas fields than Maine.

Rose says DCP officials have told him they have no plans to move in this direction. But groups opposing the Searsport tank are aren't buying the company's assurances. They've filed an intent to sue the U.S. Army Corps of Engineers to get the federal permit green-lighting the project thrown out.



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