Dylan Sumner knows all too well about propane supply issues in parts of the Upper Midwest.
His company, Propane Depot, established a rail terminal in 2015 in Barron, Wisconsin, to alleviate some of the supply pains experienced by retail propane companies in northwest Wisconsin. Now, Propane Depot is embarking on the establishment of a second rail terminal, this time across the state line in Keenan, Minnesota.
Propane Depot is completing land-use approvals for the new location, which will serve the northeast and north central parts of Minnesota.
“The soft opening is targeted for late spring 2017,” says Sumner, a company representative. “Phase [No.] 1 will give us four unloading towers, 600,000 gallons in railcar storage, 270,000 in tank farm storage and two transports loading bulk head.”
Propane Depot’s pursuit of regional rail terminals reflects the new direction of the company, which previously served as a retail business. Propane Depot owner Andy Burgess endured many of the supply pains other retailers endured in the region during the challenging winter of 2013-14.
Supply developments that winter forced Burgess to invest in his own transport, but even with that added asset his company still had to source propane from two or, depending on the weather, three hours away.
“The problem is storage,” Sumner says. “[Retailers] are rotating their storage so many times to get their aggregate sales. People aren’t investing in their own primary and secondary storage. So they rely on the transport companies to be a storage vessel, if you will.”
Because of regional supply dynamics, Propane Depot is now aggressively transitioning to wholesale supply.
“We prefer to go down the road of having multiple supply terminals [rather] than continue with retail,” Sumner says.
Like several other suppliers who’ve established rail terminals in the Midwest in recent years, Propane Depot’s investments are partly a response to the reversal of the Cochin Pipeline. The Upper Midwest has always had supply availability issues, Sumner says, but that infamous winter, coupled with the pipeline reversal, exposed those issues.
“We actually had quite a bit of warning on the Cochin reversal,” Sumner says. “It was a distant threat, but [the propane industry] had been talking about it five years prior. Andy saw the need and answered by making this investment in our industry.”
The solution to the lack of supply availability is strategically located rail terminals that offer reliable service, Sumner adds. And involving railroads in the decision-making process of new propane terminals is essential to ensure quality customer service.
As an example, Propane Depot worked closely with Canadian National Railway in selecting and developing the Barron location, Sumner says.
“We, in an effort with the railroad, asked how they wanted it built so it could be serviceable seven days a week,” he says. “We asked where they wanted it. We found six locations and said, ‘Let’s see if we can find the right one.’ It was great involvement from all parties. That’s what makes the site run so smoothly and provide reliable supply.”
Owner: Andy Burgess
Location: Barron, Wisconsin